Palantir Just Guided to 134% U.S. Commercial Growth. After a 15% Pop, the Stock Costs 42 Times Revenue.

Palantir Technologies (NASDAQ: PLTR) reported second-quarter results after the market closed Monday, and shares jumped about 15% in after-hours trading to around $144 as of this writing. It's easy to see why. Revenue grew 93% year over year, and management raised its full-year guidance across the board.

But the pop comes with math worth doing. At around $144, the artificial intelligence (AI) software company is valued at about $347 billion. Set that against the approximately $8.15 billion of revenue management now expects for 2026, and the stock costs about 42 times this year's guided sales. Not earnings -- sales.

So, did a quarter this good finally make the growth stock worth its price? I don't think it did.

Image source: Getty Images.

Growth is still speeding up

Revenue rose 93% year over year and 19% quarter over quarter to $1.94 billion, an acceleration from the first quarter's 85% growth. U.S. commercial revenue, the fastest-growing piece of the business, jumped 149% year over year to $764 million, up from 133% growth three months earlier. And U.S. government revenue grew 90% to $809 million.

The deal activity behind those numbers accelerated, too. Palantir closed 220 deals of at least $1 million in the quarter, including 73 of at least $10 million, up from 47 in the first quarter. And it closed a record $2.1 billion of U.S. commercial total contract value, up 153% year over year.

Even more, U.S. commercial remaining deal value (the total value left on its contracts, assuming customers exercise every option and cancel none of them) reached $6.2 billion, up 124% year over year and 27% from the first quarter. In other words, that figure grew faster last quarter than Palantir's reported revenue did.

Further, profits kept pace. Net income more than tripled year over year to $1.06 billion, a 55% margin, and the company's non-GAAP (adjusted) operating margin reached 62%, expanding from 60% in the first quarter. Palantir also ended the quarter with $9.2 billion of cash, cash equivalents, and short-term U.S. Treasuries.

"Demand for AI sovereignty has now been unleashed," CEO Alex Karp said in the earnings release. He told CNBC the growth "looks like this is going to go on for at least another 18 months."

Management's new outlook says as much. Palantir now expects about $8.15 billion of revenue in 2026, up from the $7.65 billion it guided to three months ago and about 82% above last year. U.S. commercial revenue is expected to grow at least 134%, to more than $3.42 billion. And management guided for about $4.9 billion of adjusted operating income for the year, about $2.16 billion of third-quarter revenue, and GAAP profits in every quarter of 2026.

What the new price already assumes

Monday's after-hours move added about $45 billion to Palantir's market value. Before the report, at Monday's closing price, the stock cost about 37 times the raised guide. A few hours later, it cost about 42 times.

Sure, Palantir converts revenue into profit at rates software rarely sees. That adjusted operating income guide works out to about a 60% margin on this year's expected sales.

But even against the profit guide, the stock costs about 71 times this year's guided adjusted operating income. Whichever line you measure against, the price arguably assumes years more of quarters like Monday's.

Two more years of growth at this year's 82% pace would put revenue near $27 billion in 2028. Hold the stock price exactly where it is, and shares would still cost about 13 times sales at that point. Even two more years of extraordinary execution, in other words, wouldn't make the stock cheap -- just less extreme.

Of course, growth this fast rarely stays this fast. Even management's own third-quarter revenue guide implies about 12% quarter-over-quarter growth, a step down from the 19% sequential pace the company just posted. Palantir has raised its full-year outlook after each of this year's first two reports, so the actual number could land higher.

But at this price, those raises aren't a bonus anymore. The valuation needs them to keep coming.

Ultimately, Monday's report settled the operating half of the argument. Growth isn't slowing yet, and profits are climbing right alongside it.

What the report didn't do was make the stock cheaper, as the stock's after-hours pop already arguably priced in the earnings growth. I'd happily own this business at a price that asks less of it. For now, I'll keep watching from the sidelines.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.