Palantir Technologies (NASDAQ: PLTR), which sells data integration, analytics, and AI deployment software to defense agencies and large enterprises through its Gotham, Foundry, and AIP platforms, climbed 12% in extended trading on Monday after the software company exceeded Wall Street's second-quarter expectations and raised its full-year 2026 outlook.

Adjusted earnings reached 41 cents per share, surpassing the 35 cents forecast by analysts tracked by the London Stock Exchange Group (LSE: LSEG). Revenue totaled $1.94 billion, above the $1.80 billion consensus estimate. Commercial sales more than doubled compared with the same period a year earlier.

The post-earnings rally followed a 29% decline in Palantir's stock year to date, driven by investor concerns that the AI software trade was losing momentum and that growth rates might decelerate. Management raised its full-year revenue growth target to 71%, an increase of 10 percentage points from the guidance issued in the prior quarter. The results stand in contrast to broader jitters about enterprise AI monetization, where investors have been scrutinizing whether software vendors can translate generative-AI capabilities into sustained, large-scale revenue.

U.S. Business Doubles as Commercial Sales and Contract Values Climb

Palantir's first-quarter 2026 results showed total revenue of $1.633 billion, representing 85% year-over-year growth and a 16% increase from the previous quarter. U.S. revenue reached $1.282 billion, rising 104% year over year and 19% quarter over quarter.

U.S. commercial revenue grew 133% from a year earlier and 18% sequentially to $595 million. U.S. government revenue increased 84% year over year and 21% from the prior quarter to $687 million.

Contract activity also expanded significantly. Palantir signed 206 deals valued at $1 million or more, including 72 contracts worth at least $5 million and 47 worth $10 million or more. Total contract value reached $2.41 billion, up 61% year over year. The deal-count trajectory offers a gauge of whether customer adoption is broadening beyond early adopters into mainstream enterprise deployments.

U.S. commercial contract value totaled $1.176 billion, a 45% annual increase. Remaining deal value for the U.S. commercial segment climbed to $4.92 billion, up 112% year over year and 12% from the previous quarter.

The unaudited quarter generated $753.998 million in GAAP operating income, corresponding to a 46% margin. Adjusted operating income reached $983.545 million, or 60% of revenue. Cash from operations totaled $899.165 million with a 55% margin, while adjusted free cash flow came to $924.630 million, representing a 57% margin.

Net income attributable to common shareholders was $870.527 million, equal to 53% of sales. Adjusted net income stood at $856.450 million. Adjusted EBITDA reached $990.310 million, yielding a 61% margin. Diluted GAAP earnings were 34 cents per share, and adjusted diluted earnings were 33 cents.

The company ended the quarter with $8 billion in cash, cash equivalents, and short-term U.S. Treasury securities. Its Rule of 40 score—a metric that combines revenue growth and profitability margin and is widely used by software investors to benchmark operating efficiency—reached 145%, a level far above the 40% threshold typically considered healthy.

Raised 2026 Outlook as CEO Karp Cites Accelerating U.S. Demand

For the second quarter of 2026, Palantir projects revenue between $1.797 billion and $1.801 billion, with adjusted operating income forecast between $1.063 billion and $1.067 billion.

For the full year, management now anticipates revenue of $7.650 billion to $7.662 billion. The company also raised its U.S. commercial revenue target to more than $3.224 billion, implying growth of at least 120%. Adjusted operating income is now expected between $4.440 billion and $4.452 billion. Adjusted free cash flow is projected at $4.2 billion to $4.4 billion.

Palantir reiterated its expectation of GAAP operating profit and GAAP net income in every quarter of 2026.

Co-founder and Chief Executive Officer Alex Karp said the company's Rule of 40 score had "soared to 145%," comparing the result to AI infrastructure companies NVIDIA (NASDAQ: NVDA), Micron Technology (NASDAQ: MU), and SK hynix (KRX: 000660). The comparison is notable because those firms supply the chips and memory underpinning AI systems, while Palantir operates at the application layer, selling software that helps organizations deploy AI models on their own data.

Karp noted that Palantir achieved its fastest annual growth rate after more than doubling its U.S. business and attributed the higher outlook to strengthening domestic demand. He highlighted that U.S. commercial sales grew 28% quarter over quarter, asserting that Palantir accomplished in 90 days what some companies might require a year to achieve, while maintaining a sales team that remained small and continued to shrink.

Karp described the U.S. commercial unit as "just nascent" and said Palantir is compensated based on the value its software delivers to customers.