(Reuters) -Palantir Technologies shares rose 5% in premarket trading on Tuesday, after the company lifted its annual revenue forecast for the second time this year, betting on strong demand for its AI-related services from governments and companies.
Investors have been betting big on the data analytics and defense software company’s military-grade artificial intelligence tools and services, with the company being one of the biggest beneficiaries from increased U.S. defense spending.
That has helped double the company’s stock price this year, making it the best performer on the S&P 500 index through last close after having sky-rocketed more than 600% in the last three years.
“Palantir isn’t just a government vendor anymore – it’s becoming an indispensable partner for enterprises in the AI revolution,” said Jacob Falkencrone, Saxo’s global head of investment strategy.
Founded in 2003 and listed in 2020, Palantir, has won a slew of U.S. government contracts this year – including a $30 million contract from the U.S. Immigration and Customs Enforcement in April and comes at a time when the Trump administration is bolstering its focus on national security.
Last week, the U.S. Army said it might spend up to $10 billion on its services over the next decade.
“Palantir’s staggering growth is showing no signs of slowing … and (its) ability to grow at scale has been underestimated by a large cohort of the market,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
Sales to the U.S. government jumped 53% to $426 million, representing more than 42% of the total second-quarter revenue of about $1 billion.
The stock trades at over 200 times its 12-month forward earnings estimates, making it the most overvalued company in the S&P 500 index, compared with AI giant Nvidia’s 34.81.
Jefferies analysts cautioned that there is a “disconnect between valuation and achievable growth.”
Co-founded by Peter Thiel, Palantir expects expenses to rise significantly in the third quarter due to seasonal hiring amid rising competition among industry leading tech firms to poach top talent, as businesses rapidly look to adopt AI.
At least eight brokerages raised their price targets on the stock after the results.
(Reporting by Siddarth S and Akriti Shah in Bengaluru; Editing by Shilpi Majumdar and Anil D’Silva)
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