Palantir’s Earnings: Continued Success in Commercial Sales Drives Home Another Strong Quarter

We are raising our fair value estimate for narrow-moat Palantir to $19 from $16 after the firm reported blockbuster second-quarter financial results and raised its topline and profitability guidance for fiscal 2024. In retrospect, some of our prior estimates, while being above consensus, did not fully capture the AI momentum uplifting Palantir's commercial sales. We continue to be optimistic about the firm's AI opportunity as a deeply embedded player in the space with years of experience working with large commercial and government clients. We also think the firm's rising profitability is a testament to the attractive unit economics built into its software business, with revenue growth far outpacing the increase in operating expenses.