Palantir is leaving its software peers behind in the AI race

By Britney Nguyen

The company's focus on sovereign AI is resonating with enterprise customers, analysts say

Palantir, led by CEO Alex Karp, saw its stock soar Tuesday following a stellar second-quarter earnings report.

Shares of Palantir Technologies were soaring Tuesday morning after the company delivered another strong quarter that has some analysts convinced that it is winning the artificial-intelligence race among software names.

The data-analytics company's (PLTR) second-quarter report came in ahead of expectations on accelerating revenue and demand, which Deutsche Bank analyst Brad Zelnick said "further reinforces our view that Palantir is operating several steps ahead of the rest of software" when it comes to turning AI into value for customers.

While many application-software providers are still figuring out how to incorporate AI into their offerings, "Palantir increasingly looks like a time traveler, having already arrived in the AI future others are still aspiring toward," Zelnick wrote in a note to clients.

He pointed to Palantir's focus on sovereign AI, which involves companies having ownership and control over their data, AI models and other infrastructure, as one approach that is resonating with customers looking to generate value from AI investments.

The company's AIP Evolve offering, which uses AI agents to test and swap AI models to improve compute and token costs and reduce latency, is another tool helping Palantir set itself apart for enterprise customers, according to Zelnick.

Palantir's "own your alpha" strategy "extends Palantir's differentiation into AI governance, an important emerging area where traditional approaches may prove insufficient," he wrote.

On that, Zelnick said Palantir's stock "deserves to trade at a premium." He upgraded his rating on Palantir's stock to a buy from a hold.

Palantir's stock soared 25.5% in recent morning trading. That put it on track for its biggest one-day gain since the record 30.8% rally on Feb. 6, 2024.

Benchmark analyst Yi Fu Lee said Palantir's growth and profitability make it "one of the largest beneficiaries of enterprise AI adoption" among software makers.

Still, the key debate among investors is going from Palantir's growth potential to whether its success can broaden beyond its U.S. business, Lee said in a note.

The company's U.S. revenue, which jumped 115% from a year ago to $1.57 billion in the second quarter, makes up 81% of its total business, Palantir CFO David Glazer previously told MarketWatch. Palantir recorded growth of 149% in U.S. commercial to $764 million for the quarter, and said that segment drove its decision to raise full-year revenue guidance for 2026 by almost $500 million to between $8.150 billion and $8.158 billion.

In Lee's view, Palantir's strength in commercial enterprise, as well as growing interest from the U.S. government and military, is already being priced in by the market.

The stock's current valuation assumes the company will keep growing at more than 80% to 90% in the near term, Lee said, which leaves little room for a slowdown in U.S. demand, major deals and its ability to grow business internationally. Therefore, Lee kept his hold rating on the stock.

Even with Tuesday's surge, the stock was still down 11.3% in 2026, while the iShares Expanded Tech-Software Sector ETF IGV has slipped 4.3% and the S&P 500 index SPX has gained 12.4%.

-Britney Nguyen

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08-04-26 1129ET