MW Palantir's stock pops against a bleak software backdrop

By Christine Ji

Investors are cheering Palantir's bullish 2026 revenue guidance as the company's AI strategy continues to be a bright spot in the software sector

Palantir's U.S. commercial business grew 137% year-over-year in the fourth quarter of 2025.

After a lackluster start to the year, Palantir's stock is set to rebound in a big way after the company's fourth-quarter earnings report impressed investors.

Shares of Palantir (PLTR) are up 11% in premarket trading on Tuesday, reflecting the company's sustained artificial-intelligence momentum. Demand for Palantir's commercial and government AI solutions sparked a 70% rise in revenue for the December quarter. The company also guided for 61% revenue growth in 2026. Wall Street analysts had been projecting just 40% growth.

"These revisions mark some of the strongest at scale we've seen in enterprise software," Citi analyst Tyler Radke wrote on Tuesday. "Palantir's momentum increasingly stands out in a software market where accelerating growth stories are rare." Radke raised his price target on Palantir to $260 from $230 on the strong outlook for 2026 - the highest rating among analysts polled by FactSet.

"Palantir remains one of our top tech names to own in 2026," Wedbush's Dan Ives wrote on Tuesday. He believes the company will "generate unprecedented traction for its entire portfolio across the federal and commercial landscapes" in the coming quarters.

Read: Palantir's stock surges as AI demand drives another record quarter

The biggest driver of growth for the quarter came from Palantir's U.S. commercial business, which grew 137% year-over-year. Analysts including Ives and D.A. Davidson's Gil Luria highlighted the rollout of the AI Forward Deployed Engineer - an autonomous agent that automates complex data transformations - as a catalyst for faster customer adoption.

Palantir's earnings outperformance comes as software companies are highly scrutinized over whether their AI initiatives can effectively drive revenue reacceleration. The skepticism from investors has led the iShares Expanded Tech-Software Sector ETF IGV to fall 15% year-to-date.

On the earnings call, CEO Alex Karp attributed Palantir's success to the company's ability to effectively deliver value from AI, a feat that he said has eluded much of the software sector thus far. At the heart of Palantir's success is the company's Ontology platform, which organizes a company's raw data into information that can be easily understood by machines.

"We are an N of 1 category of our own," Karp said. Companies investing in large language models without data orchestration capabilities will be unable to succeed, he added.

While Palantir has proven its business success with explosive revenue growth, the company's high valuation gives many on Wall Street pause. Although Luria called Palantir "the best story in software," he pointed out that the after-hours stock price following the earnings call trades at around 93x 2026 revenue, "an unprecedented premium to any peer."

While Radke acknowledged Palantir's valuation premium, he pointed to "significant positive estimate revisions" as Palantir continues to raise its guidance over the next few quarters.

See more: Palantir's stock looks less 'frothy' and is now worth buying, this analyst says

-Christine Ji

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February 03, 2026 09:26 ET (14:26 GMT)

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