This earning was crazy

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🤖 Palantir Q1 2026

Real quick before we talk about the numbers: Palantir builds AI software for governments and corporations. Think of them as the people who turn raw data into decisions, whether that's a US soldier in the field or a hospital cutting costs. They've been doing this quietly for years. Now the world has caught up to what they were building.

The Numbers (Q1 2026, ended March 31)

• Revenue: $1.63B vs $1.54B expected.

• US revenue grew 104% year over year to $1.282B. That's the first time they've broken 100% growth in the US since going public. Think about that for a second.

• US government contracts brought in $687M (up 84%) and US commercial clients added $595M (up 133%).

• EPS: $0.33 adjusted vs $0.28 expected.

• Net income hit $870.5M, roughly four times what it was a year ago. Adjusted free cash flow was $925M at a 57% margin. Cash on hand: $8.0B. Zero debt.

📊 What Actually Matters Here

There's a metric called Rule of 40. It adds your revenue growth rate to your profit margin. If the total hits 40 or above, you're considered a healthy software business.

Palantir's Rule of 40 score just hit 145. Alex Karp said they've shattered it, a feat matched only by NVIDIA, Micron and SK hynix among fellow AI infrastructure companies.

They also closed 206 deals worth over $1M each in a single quarter. That included 72 deals over $5M and 47 deals above $10M. This isn't hype. This is a sales machine working at serious scale.

And guidance? They raised full year 2026 revenue guidance from $7.18B to $7.65B, and US commercial revenue growth guidance to at least 120%. Q2 guidance of $1.8B came in way above the $1.68B analysts were expecting.

🦅 The War Angle Nobody Talks About

We're in the middle of the US-Iran war right now. Most people see that as a risk to markets.

Palantir sees it as a proof of concept. Karp said Palantir's AI is giving the US and its allies an edge in the escalating conflict in Iran and across the Middle East.

Maven Smart System. Department of War contracts. Department of Homeland Security. USDA. NVIDIA partnership for a "Sovereign AI OS." The government business isn't just growing, it's accelerating in real-world conflict conditions.

👉️ Pete's Take

PLTR absolutely deserves to be on your radar if it isn't already.

The business quality here is elite. US commercial is genuinely accelerating, not just holding on. Government revenue is bulletproof in the current macro environment. And the cash generation is real, not accounting tricks.

The problem? The valuation is extreme. The stock trades at a P/E ratio of 233. That means you are paying a massive premium for future growth. If growth ever wobbles, the stock will get punished hard. We saw that in February when they reported a blowout Q4 2025 and the stock still fell 11% the next day.

So the question isn't whether the business is great. It clearly is.

The question is: at what price does "great business" become "too expensive to hold through volatility"?

I don't have a clean answer. But I'm watching it closely.

The shares closed down more than 2% after earnings. Even with such a stellar earnings.

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Happy Hunting!

Pete
Invest with Pete

🚨‼️ By the way, I’ll never PM anyone on telegram or any other social media platforms. If you receive any “Pete” messaging you, these are scammers impersonating me. Pls beware!

The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.