“The performance shows us that Palantir’s value proposition for AI and generative AI solutions continues to resonate with customers despite a crowded and opaque market environment,” said Jordan Berger, analyst at Third Bridge.

Partnership between Palantir and Microsoft

“We have heard from experts that downsizing the initial deployment of Palantir’s Foundry platform could significantly expand the company’s target market, and the introduction of AIP and the bootcamp sales model appears to be successfully facilitating that transition,” he added.

The Denver-based company also forecast annual sales of around $2.75 billion, a slight increase from the previous forecast, and adjusted operating profit in the range of $966 million to $974 million.

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This prediction actually came just days before the group announced a new partnership with Microsoft (MSFT) The technology giant will integrate Palantir’s products into Azure’s cloud services for government customers.

Palantir will also acquire Azure’s OpenAI and have the ability to deploy it in confidential environments across its growing government and intelligence customer base.

“With this major deal in place and Microsoft leveraging Palantir for AI and (large language model) capabilities for the U.S. government, the company can now increase the pace of AI implementation as Palantir continues to drive AIP adoption in the federal sector,” said Wedbush analyst Dan Ives.

“We believe this will be a launching pad for the Palantir AIP story to reach the (Department of Defense) and broader Beltway ecosystem over the next 12 to 18 months,” he added.

The story continues

Growing trading business

Ives gives Palantir shares an “outperform” rating and a price target of $38.

Citigroup analyst Tyler Radke, who raised his price target on Palantir by $2 to $30 a share, said government contracts were a key factor in the company’s second-quarter earnings beat.

“The results show that Palantir’s approach, potentially aided by AIP, is able to tap into new spending pools for AI, with record eight-digit net additions from large customers and a 15-point reacceleration in U.S. trade that helped offset weaker performance in international markets,” Radke and his team wrote.

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“We are impressed with the second quarter results but see that future earnings are capped by the highest valuation in software, with a revenue multiple (for the next 12 months) of 19 and a ratio (enterprise value to free cash flow) of around 60, with continued volatility in government spending,” he added.

Palantir shares rose 0.58 percent in early trading on Friday, changing hands at a price of $29.48, bringing the stock’s gain since the beginning of the year to around 73 percent.

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