After Palantir's Blowout Earnings Report, Is the Stock a Buy, a Hold, or a Sell?

Palantir Technologies (NASDAQ: PLTR) has been one of the most successful companies of the artificial intelligence (AI) boom so far -- and this is from an earnings and a stock performance perspective. The company has reported 11 straight quarters of accelerating revenue, has wowed the market with its ability to balance profitability with growth, and continues to increase guidance. As for the stock, it's soared more than 1,800% over the past three years.

But, in recent times, while earnings have kept up the momentum, stock performance hasn't: Palantir shares have slipped about 17% since the start of 2026. The reasons are varied. In some cases, this is part of a general rotation out of some of the earliest AI winners into a new batch of stocks. In other cases, investors have worried about Palantir's valuation and even the company's competitive advantage.

All of this means that today, even after yet another blowout earnings report, you might be wondering what to do about Palantir stock. Is it a buy, a hold, or a sell? Let's find out.

Image source: Getty Images.

Government and commercial customers

We'll start by taking a quick look at Palantir's business. The company makes software systems that aggregate a customer's data -- so the customer can use that data to make decisions, develop new strategies and innovations, and more. Customers include governments, particularly the U.S. government, as well as commercial players.

Palantir actually has been around for quite some time -- more than 20 years -- building out its expertise and establishing its reputation. Most of that time, it's relied on government customers for growth, but over the past few years, while government revenue continues to advance, commercial revenue and customer count have surged.

Commercial customers are rushing to Palantir because, thanks to its Artificial Intelligence Platform (AIP), they're able to easily apply AI to their problems. AIP, released in 2023, integrates the power of large language models with Palantir's data expertise, creating an AI-driven solution for customers.

As mentioned, all of this has driven spectacular earnings growth, and this continued in the recent quarter. During the period, Palantir's U.S. commercial revenue surged 133%, and U.S. government revenue climbed 84%. Total revenue, growing in the double digits, reached more than $1.6 billion. The company's Rule of 40 score jumped to 145% -- this measure of the balance between growth and profitability is considered positive if it's 40% or higher.

Palantir raises guidance -- again

Palantir, once again, lifted guidance for full-year revenue -- to at least $7.65 billion -- U.S. commercial revenue, adjusted income from operations, and adjusted free cash flow.

And it seems Palantir's biggest problem is that it can't fully meet demand for its systems.

So, considering this picture as well as the headwinds I mentioned above, is Palantir stock a buy, a hold, or a sell right now?

As mentioned, investors have worried about Palantir's competitive advantage and the stock's valuation. I think there's reason to be confident about the company's moat. It's true that AI may replace some of the world's software, but Palantir is very unlikely to be at the top of that list. It's important to remember that Palantir offers a system that's deeply integrated into a customer's organization, with security and privacy features that are greatly valued. This means that it's costly and complicated to switch -- and the reliability and security of Palantir suggest customers probably wouldn't want to. So, I wouldn't worry about AI or even another technology replacing Palantir's systems any time soon.

A look at Palantir's valuation problem

As for valuation, it's come down quite a bit from its peak, but it remains high.

PLTR PE Ratio (Forward) data by YCharts

That said, this metric only takes into account earnings estimates for the coming year -- and not earnings potential down the road. So, even though Palantir may look expensive right now, valuation metrics might even out within the next few years as the company grows.

So, what move should you make? This depends on your investment strategy. If you're a value investor or a very cautious investor, Palantir stock probably isn't the best choice for you right now. Its valuation -- regardless of what may unfold in the coming years -- remains high today. And considering the recent rotation out of some of the early AI winners, Palantir stock may not rebound immediately -- no matter how great the company's earnings numbers look.

But, if you're a growth investor, now, on the dip, is a fantastic time to buy shares of this company that continues to wow the market with its earnings performance. And the key step will be to hold onto the shares for the long term, to potentially benefit from another explosive wave of growth.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.