FY26 Guide Crushes Consensus by $960M, U.S. Commercial Locked in at +115%, Adj OI Margin Hits 57% — and the Stock Is Finally Down Enough to Pay for It: Upgrading to Outperform

Results vs. Consensus

Q4 2025 was the largest beat-and-raise in Palantir's history on every dimension that matters. Revenue cleared Palantir's own guide by ~$77M (+5.8%) and the Street by ~$77M (+5.8%) — the third consecutive quarter where the magnitude of the beat exceeded recent comparables, and the first quarter where the FY+1 guide became the dominant catalyst rather than the in-quarter print. The +70% YoY top-line growth at $1.4B of quarterly revenue is mechanically the highest growth rate Palantir has reported as a public company. The ten consecutive quarters of accelerating top-line growth is a streak with no precedent in large-cap enterprise software.

Quality of the Beat

• Revenue: Fully organic, no acquisitions, no FX-driven distortion. Karp explicitly emphasized this on the call (“these numbers are fully organic, we don't do acquisitions”). The $77M beat over Palantir's own guide is in absolute terms slightly smaller than Q3's $96M but comes off a much higher base — the $1.40B quarter is +19% sequentially, the largest QoQ growth Palantir has ever printed and well above the +13% the company guided to in November. U.S. Commercial drove the lion's share of upside again ($507M actual vs. ~$430M trajectory implied by November guide), with U.S. Government providing a meaningful additional contribution as the Army EA finally appears in the run rate. Quality unambiguous.
• Margins: The 57% adj OI margin (vs. 52% guide midpoint, vs. 51% in Q3, vs. 46% in Q2) is the cleanest quantitative datapoint in the entire print. This is now the second consecutive quarter of significant margin expansion against ramping headcount — the “one quarter is not a trend” objection we raised in Q3 has been resolved in the bull's favor. The structural ceiling we framed as “possibly 55%+ if AIFD leverage compounds” in Q3 has been printed at 57% in Q4 and guided to ~57% for FY26. The implication for the multi-year P&L is large — if 55%+ is the new floor, the previous “high 40s” ceiling assumption needs to be permanently retired.
• EPS: Adj EPS $0.25 (+19% beat) is operationally driven, with operating margin doing essentially all the work. SBC continued to compress as a % of revenue. Below-the-line tax and interest contributions were broadly stable. GAAP EPS of $0.24 (vs. $0.18 in Q3) implies trailing-four-quarter GAAP EPS approaching ~$0.80 and a forward run rate at the new operating profile of ~$1.00+ — which is the right denominator to use for the long-term valuation framing rather than the diluted-share-bloated $0.13–0.20 ranges previously discussed.
• FCF: $791M of adj FCF on $1.407B of revenue is a 56% FCF margin — a record and well above Q3's 46%. Working capital was a tailwind on the quarter (deferred revenue from large enterprise contract signings), but even normalizing, the underlying conversion from adj OI to FCF held above 95%. FY25 adj FCF of $2.27B (vs. raised guide of $1.9–2.1B) is a $170M+ overshoot of the high end. FY26 adj FCF guide of $3.925–4.125B is what crushed the Street — consensus had been at ~$3.1B.

Segment Performance

U.S. Commercial — The Acceleration That Refuses to Decelerate

U.S. Commercial revenue of $507M (+137% YoY, +28% QoQ) is the headline of the quarter and the data point that singularly justifies a re-rating. The trajectory through 2025 was: +71% (Q1) → +93% (Q2) → +121% (Q3) → +137% (Q4). Four consecutive quarters of acceleration at progressively larger absolute revenue bases is a pattern with no analog in enterprise software at this scale. We wrote in Q3 that the leading indicators had inflected higher and pushed the deceleration cliff one full quarter further out; in Q4 they inflected higher again, and the FY26 U.S. Commercial guide of >$3.144B (≥+115% YoY) pushes the deceleration question into 2027.

The leading indicators are even more striking than the in-quarter print. U.S. Commercial RDV of $4.38B (+145% YoY, +21% QoQ) against $507M of in-quarter U.S. Commercial revenue is a coverage ratio of ~8.6x — meaning the contracted future revenue book is approaching the level required to support multi-quarter sustained +100%+ growth even on conservative conversion assumptions. NDR jumped to 139% (+500 bps QoQ from 134% in Q3, +21 pts YoY). Total quarterly TCV bookings of $4.262B (+138% YoY) is the highest TCV quarter in company history. 61 deals over $10M closed in the quarter alone — up from 53 in Q3.

"Our fourth quarter results are nothing short of historic, capping off a monumental year. Overall revenue surged 70% year over year, our highest growth rate as a public company. We closed our highest TCV quarter ever at $4.3 billion." — Ryan Taylor, CRO

"Speed to production and transformational scale is no longer optional; it's existential." — Ryan Taylor, CRO

Assessment: The +137% Q4 print combined with the >$3.144B / +115% FY26 guide essentially eliminates the U.S. Commercial deceleration thesis as a near-term risk. The math now requires Palantir to grow U.S. Commercial revenue from $1.465B FY25 to >$3.144B FY26 — a +115%-plus rate against materially harder comps in H2 26. The fact that the company is willing to guide to that level on the Q4 call (not waiting for the Q1 print to set the bar) is a confidence signal that, given Palantir's historical guidance posture, almost certainly bakes in conservatism. In our view the realistic FY26 U.S. Commercial outcome is in the $3.3–3.5B range, implying +125–140% YoY actual against the +115% guide.

U.S. Government — The Army EA Becomes Visible

U.S. Government revenue of $570M (+66% YoY, +17% QoQ) is the first quarter where the Army Vantage / EA contribution materially shows up in the run rate, and it is decisively above the steady ~+52–53% trajectory of Q2/Q3. The +14-point sequential acceleration in YoY growth is itself a meaningful event — the segment had been functioning as a steady-Eddie compounder underwriting commercial volatility, and Q4 marks the inflection where the U.S. Government segment becomes a contributor to growth acceleration in its own right. Sankar's framing of Maven continuing to roll out to all combatant commands is consistent with a multi-quarter ramp shape; Golden Dome program inclusion is now a stated fact rather than a prospective opportunity.

Assessment: U.S. Government segment growth of +66% at this scale is unprecedented for any defense-tech peer, and the Army EA is now demonstrably translating into recurring task-order revenue. The structural derisk profile we cited in Q3 has been quantitatively confirmed. We continue to model the EA as a multi-quarter glide path rather than pulling the $10B ceiling forward, but the Q4 print justifies tightening our FY26 government segment estimate to +35–45% YoY (from prior +35%).

International — Modest Reacceleration but Still “Stagnant”

The combined international book (~$331M, +11% QoQ) shows a modest acceleration to ~+22% YoY from Q3's ~+10%. International government continues to anchor (UK and broader European defense modernization), while international commercial remains the deliberate deprioritization. Karp's response on the international question (asked again this call by an RBC analyst on European rearmament tailwinds) was unchanged: U.S. opportunity is too large to redirect FDE capacity, and the European commercial book is allowed to remain stagnant by design. This is now the fourth consecutive quarter of identical framing.

Assessment: The acceleration to ~+22% — if real and not noise — is a marginal positive but does not change the strategic posture. International commercial remains a vulnerability that the magnitude of U.S. results continues to mask. At some point in 2026 we expect a re-engagement plan announcement; the timing is not knowable from the Q4 disclosure.

Key KPIs

The KPI matrix confirms what the segment numbers showed: every leading indicator inflected higher again, with the operating-leverage line items doing the most work. The slight dip in deals ≥$1M and ≥$5M (180 and 84 vs. 204 and 91 in Q3) is a function of deal-size mix shift — the $10M+ tier accelerated to 61 (+15% QoQ) and the dollar value per deal continues to expand. NDR at 139% means existing customers are now expanding at a 39% net rate before counting new logos, the highest level Palantir has reported. Adj OI margin and adj FCF margin both stepping up another ~600–1,000 bps QoQ confirms the productivity slope from Q3 was not a one-quarter signal.

Key Topics & Management Commentary

Overall Management Tone: Confident and triumphant on the call, with the combative posture from November notably dialed back — Karp let the print do the talking. Glazer was methodical and clean as always; Sankar leaned into AIFD as an SAP migration / ERP modernization proof point; Taylor's prepared remarks were the most quantitatively dense we've seen, with the “existential” framing of customer adoption velocity being the most aggressive new sentence. The shift from Q3's offensive-confrontational stance to Q4's confident-restrained stance is, in our read, the right cultural choice given the print quality — the numbers are now unambiguously vindicating the November posture without requiring rhetorical reinforcement.

1. The FY26 Guide Is the Story

The single most important new information in the print is the FY26 framework. Revenue guide of $7.182–7.198B (+61% YoY at midpoint) cleared FactSet consensus of ~$6.22B by $960M / +15.4% — the largest absolute initial-year guide overshoot in Palantir's history and the largest relative overshoot we've seen from any large-cap software business in this cycle. The U.S. Commercial guide of >$3.144B (≥+115% YoY) is the data point that fundamentally resolves the “is the +120% rate a peak?” debate — management is signaling not just durability but acceleration into FY26 vs. the +109% FY25 actual.

Adj OI guidance of $4.126–4.142B (~57% margin) is the second key data point: 57% is no longer a Q4 anomaly, it is the FY26 baseline. Adj FCF guide of $3.925–4.125B (~56% margin) crushed Street consensus of ~$3.1B by ~$925M / +30% — this is the quantitative manifestation of the AIFD-leverage thesis at the cash-conversion line. Q1 26 guide of $1.532–1.536B revenue (+57% YoY) cleared the $1.32B FactSet number by +16%, signaling that the FY26 framework is not back-end-loaded.

"We had an exceptional fourth quarter with our Rule of 40 score increasing to 127. Fourth quarter revenue grew 70% year over year. Full year 2025 revenue grew 56% year over year. U.S. commercial business grew 137% year over year. Net dollar retention was 139%, an increase of 500 basis points." — David Glazer, CFO

Assessment: The FY26 guide is the most important data point Palantir has ever issued. It singularly resolves multiple bear-case questions: (a) U.S. Commercial deceleration risk, pushed to FY27; (b) margin sustainability, confirmed for at least 12 more months at 57%; (c) FCF conversion, explicitly guided at >55%. The Street will need to materially raise FY26 numbers (consensus was at ~$6.22B revenue / ~$3.1B FCF) and FY27 numbers will follow. We expect post-print FY26 consensus to settle at $7.20–7.30B revenue and $4.0–4.2B adj FCF.

2. Adj OI Margin Hits 57% — The AIFD Productivity Story Is Now Structural

The 57% Q4 adj OI margin (vs. 51% Q3, 46% Q2, ~45% Q4 24) is the second consecutive quarter of significant margin expansion against ramping headcount. We wrote in Q3 that one quarter of margin expansion was a positive signal but not a structural reset; two quarters in a row, with the second quarter's margin guided forward into FY26, materially shifts the long-term margin assumption. The implied long-term ceiling for adj OI margin in our model moves from “mid-to-high 50s” (post-Q3) to “low 60s” (post-Q4). Sankar's framing of AIFD's capabilities — powering complex SAP ERP migrations from ECC to S/4 internally and serving 1B+ API gateway requests/week — is the technical substrate of the productivity slope.

"AIFD is now capable of powering complex SAP ERP migrations from ECC to S/4. We serve over 1 billion API gateway requests a week." — Shyam Sankar, CTO

Assessment: This is now confirmed as a structural operating-leverage story, not a transient one. The bull-case math at fair value now needs to assume long-run adj OI margin of 55–60% (vs. our prior 50–52%), which adds several hundred basis points of multiple support and is the single most important model-level change from this print. We are revising our long-term margin assumption upward.

3. U.S. Government Acceleration — Army EA Is in the Run Rate

U.S. Government revenue at +66% YoY ($570M) is the first quarter where the Army EA / Vantage contribution materially adds to the segment growth rate. The +14-point YoY acceleration vs. Q3 is consistent with the multi-quarter ramp shape we modeled. Maven continuing to roll out to all combatant commands and Golden Dome inclusion are now stated facts rather than prospective opportunities. The structural derisk on the FY26–FY30 government revenue line we cited in Q3 is now empirically validated — the government segment is no longer a steady-Eddie offset to commercial volatility, it is a genuine growth contributor in its own right.

Assessment: Tightening our FY26 U.S. Government estimate to +35–45% YoY (from prior +35%). The $10B Army EA ceiling remains explicitly off the table for near-term revenue modeling, but the conversion mechanics are now visible enough that we can model the full ramp curve through FY27–FY28 with materially more confidence.

4. Karp's Tone Shift — From Combative to Confident-Restrained

The most interesting cultural read on the call was the Karp posture shift from Q3 to Q4. November's combative response to the Burry short (“market manipulation,” “bats--t crazy”) gave way to a Q4 prepared-remarks tone that we'd characterize as confident-restrained — he allowed the print to do the rhetorical work. The most Karp-esque line of the call (“$1.27, 70, 93. Those are my favorite numbers”) was a victory-lap gesture rather than a counter-attack. The implicit message: the cleanest print in software-industry history is the appropriate response to short-side narratives; further verbal escalation is unnecessary.

"One of the truly iconic performances in the history of corporate performance. This company grew 93% in the U.S. … 70% aggregate growth. We are an n of one category of our own." — Alex Karp, CEO

Assessment: The tonal modulation is institutionally appropriate. Q3's combative posture was a tactical positive but a strategic risk; Q4's restrained confidence is durably positive. We read this as the company internalizing that the print quality has now reached the level where additional rhetorical defense risks looking insecure rather than confident.

5. Hivemind, Maven Expansion, and 1B Weekly API Gateway Requests

Sankar's prepared remarks introduced two technical proof points worth noting: (a) Hivemind has graduated to an architecture that lets the AI develop novel solutions to emergent challenges (a step beyond the workflow orchestration framing of prior quarters); (b) the AIP-platform infrastructure is now serving over 1B API gateway requests per week, which is the first time Palantir has disclosed an absolute scale-of-usage metric for the AIP platform. The 1B/week number is a reference frame — it implies a usage volume in the same order of magnitude as the largest hyperscaler API services and is the empirical answer to the “is AIP a real platform or a sales narrative?” question.

Assessment: Both data points incrementally strengthen the platform-versus-tool framing. Neither has direct revenue implications in the near term, but both contribute to the long-term competitive moat narrative against Microsoft Fabric / Databricks / Snowflake.

6. International Posture — Fourth Quarter of “Stagnant” Framing

Asked again about Europe (this time framed around European rearmament tailwinds), Karp / Sankar reiterated the now-familiar “stagnant” characterization with no re-engagement timetable. International government continues to hold via UK / NATO modernization; international commercial remains intentionally deprioritized. The strategic logic (FDE capacity is finite, U.S. wallet share is too large to walk away from) is internally consistent. The tactical risk is unchanged: at some point European hyperscaler PaaS competitors will lock in long-cycle commercial accounts that Palantir is forfeiting.

Assessment: Four consecutive quarters of identical “stagnant” framing without a re-engagement plan is now firmly a pattern. Worth tracking into 2026 but immaterial to near-term financial outcomes given the dominance of U.S. results.

Guidance & Outlook

This is the largest absolute initial-year guide overshoot we have observed from a large-cap software business in this cycle. The FY26 revenue guide of $7.18B midpoint requires a +61% YoY rate against the +56% FY25 actual — meaning Palantir is guiding to an additional 500 bps of acceleration on top of the already record-setting FY25 result. The U.S. Commercial guide of >$3.144B implies the +137% Q4 actual is not the peak; management is signaling the +115% FY26 rate as a floor, with realistic upside to +125–140% based on RDV coverage math.

Implied Q-over-Q ramp: Q1 26 guide of $1,534M midpoint represents +9% QoQ off Q4's $1,407M actual — consistent with normal Q1 seasonality after the Q4 enterprise booking spike. The implied Q2–Q4 26 trajectory to hit $7.18B FY total requires an average sequential ramp of ~+9–11% per quarter, which is mechanically achievable but requires the U.S. Commercial momentum to continue at the +25–30% QoQ rate Palantir has been printing.

Street will likely reset to: FY26 revenue at ~$7.20–7.30B (vs. pre-print ~$6.22B), FY27 to ~$10.0–10.5B (vs. pre-print ~$8.0–8.5B). At ~$147 (~+11% post-print) and ~2.42B diluted shares (~$356B market cap), PLTR trades at roughly ~20x EV/sales on calendar 2026 guide midpoint and ~14x on FY27 implied — finally a multiple range that is in the same neighborhood as best-in-class software peers (Snowflake, ServiceNow, CrowdStrike trade in the 12–20x forward sales range), albeit at materially higher growth and margin profile.

Guidance style: The “blowout-and-raise-by-15%” cadence on the FY+1 number is itself the defining new pattern. Given Palantir's historical guidance posture (initial guides have consistently been beaten by 5–15% over the past four years), the realistic FY26 outcome is in our view $7.5–7.8B revenue, ~58% adj OI margin, and ~$4.3–4.5B adj FCF.

Analyst Q&A Highlights

Topic: 2026 Sustainability and the “Show Me Story” Narrative

• Mariana Perez Mora, Bank of America: Asked whether Palantir was seeing a change in how customers are framing 2026 AI investment given that “the markets have already decided 2026 is the show me story for AI.” Karp / Glazer responded with the FY26 guide framework as the answer; Sankar emphasized the AIFD productivity proof points (SAP migration, 1B API requests/week) as the customer-replicable evidence.
  Assessment: The most strategically important question of the call. Management's answer is essentially “our FY26 guide is the show.” The +61% revenue / 57% adj OI margin guide is the unambiguous response to the “show me” framing.
• BofA also asked about “ammo OS or missile OS” opportunities — whether Palantir's defense-tech footprint extends to munitions / weapons platform integration. Sankar declined to confirm specific programs but characterized the broader DoD modernization wallet as “effectively unlimited” for software-defined defense systems.
  Assessment: Optionality / TAM-expansion question rather than a near-term revenue question. Worth tracking but not modeled.

Topic: U.S. Commercial Wallet Expansion

• Daniel Ives, Wedbush: Asked whether Palantir is winning incremental share of customer technology budgets vs. one-off use-case spending — specifically the “bigger piece of the budget” framing. Taylor confirmed the “whole commercial go-to-market strategy is showing and actually delivering value impact” and tied this back to the 61 deals over $10M closed in the quarter.
  Assessment: Confirmation of the platform-versus-tool framing. The 61 $10M+ deals (+15% QoQ) is the technical evidence that customers are signing enterprise-wide commitments rather than departmental use cases.

Topic: International Re-engagement

• Jeff Jay (asking on European rearmament tailwinds): Asked whether Palantir anticipates international reacceleration. Karp and Sankar reiterated the “stagnant” framing and the deliberate U.S. prioritization. International government holding via UK / NATO; no commercial reactivation plan disclosed.
  Notable non-answer: Fourth consecutive quarter of identical framing. The deliberate-deprioritization narrative is now a structural pattern rather than a sequencing choice.

Topic: Margin Sustainability and Long-Term Profile

• Multiple analysts pressed on whether the 57% Q4 adj OI margin and the FY26 ~57% guide represent a peak or a new baseline. Glazer characterized the productivity profile as durable and tied it to the AIFD leverage story; declined to formalize a long-term margin target beyond the FY26 framework.
  Assessment: The implicit answer is that 57% is a baseline, not a peak. Glazer's refusal to call it a ceiling is itself signaling.

What They're NOT Saying

1. No long-term (FY27–FY28) margin or growth framework. Despite the magnitude of the FY26 guide and the obvious analyst appetite, management did not provide multi-year context. This is consistent with historical posture but, given the $7.18B FY26 number, the Street is now extrapolating a $10B+ FY27 path that management has not formally endorsed. Some sell-side notes flagged this absence.
2. No quantification of AIFD as a discrete revenue line. AIFD remains positioned as both internal productivity engine and externally-messaged platform capability, but management did not break out AIFD-specific revenue contribution. The same modeling ambiguity from Q3 persists.
3. No update on hyperscaler PaaS competitive dynamics. Microsoft Fabric / Databricks / Snowflake remained unaddressed for the fourth consecutive quarter. As long as U.S. Commercial is printing +137% YoY, this is a non-issue; the question will move front and center if growth ever normalizes.
4. No commentary on dilution or buyback pace at current price levels. The $880M buyback authorization disclosed in Q3 was not specifically updated; we don't know whether buyback was paused during the November/December stock weakness, whether it's been re-engaged post-print, or whether the authorization has been refreshed.
5. No direct response to the Burry short. In contrast to Q3, Karp did not address Burry by name on the call. The implicit message — that the FY26 guide is the rebuttal — is institutionally appropriate, but the absence of explicit commentary leaves the bear-side narrative space open. We view this as a positive (avoidance of further verbal escalation) rather than a negative (failure to defend).
6. No update on international restructuring timetable. Four consecutive quarters of “deprioritization” without a timeline for re-engagement is a pattern. European competitors continue to take long-cycle wins that Palantir is forfeiting.

Market Reaction

• Pre-print context: PLTR closed Dec 31, 2025 near $177.60. Drifted lower through January 2026 in the high-$170s to low-$130s range, weighed by the broader AI-name de-rating that began with the Burry short disclosure (early November) and his mid-November 13F filing showing ~$912M notional / ~5M put contracts.
• Feb 2 close (Monday, pre-AMC release): PLTR closed in the low-$130s area, well off the $207 Nov 3 intraday all-time high. The stock had effectively given back ~30%+ from the November peak heading into the print.
• After-hours reaction (Feb 2 AMC, post-press release / call): Initial reaction +5% on the press release headline; expanded materially as the FY26 guide was digested through the conference call.
• Intraday Feb 3 (Tuesday — cutoff): Up ~11% on heavy volume, closing in the high-$140s area (consistent with Morgan Stanley's same-day equal-weight $205 PT note implying ~39% upside, which back-solves to ~$147).
• Estimated implied market cap at ~$147: ~$356B on ~2.42B diluted shares.
• Sell-side reactions (within 24 hours): Universally positive. Citi upgraded to Buy from Neutral, raising PT to $260 (from $235). Morgan Stanley maintained equal-weight, raising PT to $205. Bank of America maintained Buy with PT $255. Several other bracket houses raised price targets in the 25–50% range. The common thread across notes was the FY26 guide framing — specifically the +60%+ revenue growth (vs. consensus ~+43%) and the ~$4.1B adj FCF (vs. ~$3.1B Street).

The print produced exactly the opposite market dynamic from Q3: where Q3's cleaner-than-clean operational result was met with an 8% sell-off on entry-point and Burry-catalyst sentiment, Q4 was met with an 11% rally because (a) the entry point had already corrected ~30%+ from the November highs, leaving positioning much lighter, and (b) the FY26 guide gave the bulls an unambiguous data point to anchor on for the next 12 months. The combination of materially better entry, substantially better print, and explicit FY+1 framework was the recipe the market needed to re-engage.

Street Perspective

Debate: Has the Q4 Guide Eliminated the Deceleration Risk?

Bull view: The FY26 U.S. Commercial guide of >$3.144B / ≥+115% YoY is essentially a management commitment to sustained acceleration into FY26. With $4.38B U.S. Commercial RDV against $507M Q4 in-quarter revenue (~8.6x coverage), the math is now mechanically supported through at least FY26 even on conservative conversion assumptions. The bear-case deceleration question gets pushed to FY27, by which point the absolute revenue base is large enough that even moderate growth rates produce meaningful absolute dollar contributions.

Bear view: The FY26 guide is impressive but the FY27 deceleration math is genuinely brutal. Going from $7.2B FY26 to ~$10B FY27 implies +39% growth — a substantial deceleration from FY26's +61%. By FY28 the comp set requires the rate to compress further. The current multiple still discounts none of that compression, and the Burry thesis is mechanically right on a 24–36 month view even if it's wrong for the next 12 months.

Our take: The bull case is now materially stronger for the next 12–18 months than at any prior point in our coverage. The FY26 guide is a management commitment; the RDV book provides the mechanical support. The bear case is a 24–36 month horizon question, and at ~20x FY26 sales / ~14x FY27 sales the multiple is now at a level where the deceleration risk is meaningfully — though not entirely — in the price. Net read: the next 4–6 quarters are the highest-conviction window for owning PLTR in our coverage history.

Debate: Is 57% Adj OI Margin the Floor or the Ceiling?

Bull view: Two consecutive quarters of margin expansion (51% Q3, 57% Q4) at flat-to-rising headcount and the explicit FY26 guide at ~57% margin makes 57% the new baseline, not a peak. The AIFD productivity slope is a structural unlock: if Palantir can serve 1B API requests / week and orchestrate complex SAP migrations internally, the addressable productivity gain extends well beyond the current cost base. The realistic long-term ceiling is now in the low-60s.

Bear view: Software margin profiles tend to mean-revert — even best-in-class peers (ServiceNow, Salesforce at peak) have struggled to sustain adj OI margin above 55% over extended periods. Palantir's 57% guide for FY26 is achievable but represents a compounding set of operating assumptions (SBC continuing to compress, hiring continuing to lag revenue, no major new initiative spend). Any one of those assumptions slipping pulls the margin back to the 50–52% range.

Our take: The structural case for sustained 55%+ margin is now meaningfully stronger than at any prior point in the AIP era. We're revising our long-term margin assumption to 55–60% (from prior 50–52%) but acknowledging the FY26 guide of 57% is the right working baseline rather than a launchpad to higher.

Debate: Does the Burry Short Still Matter?

Bull view: The Q4 print and FY26 guide are an empirical body-blow to the Burry thesis. Every fundamental data point invalidates the “valuation requires perfect execution” framing for at least 12–18 months. The 11% rally on Feb 3 is the market's verdict that the short-side narrative has lost its catalyst. Burry-style shorts have a mixed historical record (early Tesla shorts being the canonical counterexample); the substance of the thesis is unchanged but the timing is now visibly wrong.

Bear view: Burry's positions are typically held with 12–36 month horizons. The Q4 print may mark a tactical low for the short P&L, but the structural thesis (multiple compression as growth normalizes into FY27–FY28) remains mathematically intact. The Feb 14 13F filing will reveal whether Scion held through the print or capitulated; either way, the bear-side institutional framing on PLTR remains in the conversation.

Our take: The Burry thesis is fundamentally weaker after Q4 than before. The next 12–18 months of operational support are now formalized in FY26 guidance, and the multiple has compressed to a level where the short's payoff requires both significant deceleration AND multiple compression beyond what's already in the price. Sentiment overhang persists but is much less acute than in November.

Debate: Is the Valuation Defensible — Updated for Q4?

Bull view: Q4 + FY26 guide materially improves both the numerator and the denominator of the valuation argument. At ~$147 / ~$356B market cap and FY26 revenue of $7.2B, PLTR trades at ~20x forward sales — for the first time in our coverage in the same range as best-in-class software peers. On FY27 implied (~$10B+), the multiple compresses to ~14x. With Rule of 40 = 127, adj OI margin at 57%, and FCF margin at 56%, the multiple is mathematically proportional to the operating quality. DCF math now supports the current price under 25%+ FCF CAGR through 2030 — which the FY26 guide makes a lay-up.

Bear view: ~20x forward sales is still a premium multiple for a business that, by FY28, will likely be growing in the 25–35% range with adj OI margins potentially compressing from the 57% peak. Best-in-class software businesses at maturity (Microsoft, ServiceNow, CrowdStrike) trade at 12–18x forward sales; PLTR's premium needs to be justified by sustained Rule of 40 above 80, which is plausible but not guaranteed past FY27. The Burry argument is mechanically correct on a 36-month horizon even if obviously wrong for the next 12 months.

Our take: Q4 is the first print in our coverage where the valuation case is genuinely defensible without requiring heroic assumptions. At ~20x FY26 sales / ~14x FY27 sales, PLTR trades in a range where the upside scenarios (FY26 actual at $7.5–7.8B, FY27 at $10.5–11B) deliver meaningful return without requiring multiple expansion. The downside scenarios (deceleration to +30–35% by FY27, margin reversion to 50–52%) deliver flat-to-modest losses rather than the catastrophic compression the Q3-era multiple discounted. This shift in the asymmetry is the foundation of our rating change.

Model Implications

Updates to our model following Q4:

• FY25 revenue: Anchor at actual ($4.475B; +56% YoY). Our prior $4.398B model was below; revising to actual.
• FY26 revenue: Revise to $7.30–7.50B from prior $6.4–6.7B. We model a +5–7% beat over the company guide of $7.18B based on historical guidance posture. U.S. Commercial assumed +125% YoY (vs. ≥+115% guide), U.S. Government +40%, International +18%.
• FY27 revenue (new): $10.0–10.5B (+38–43% YoY). U.S. Commercial assumed +60% YoY (deceleration from +125% FY26 modeled), U.S. Government +30%, International +20%.
• Adjusted operating margin: FY25 actual 50%. FY26 we revise upward to 57–59% (from prior 50–52%) reflecting the Q4 print and FY26 guide. Long-term ceiling assumption raised to 55–60% from prior 50–52%.
• Adjusted FCF margin: FY25 actual 51%. FY26 model 55–57% (above guide midpoint of ~56%).
• Stock-based compensation: Continuing to track well below revenue growth. SBC-as-% of revenue continues to compress from ~16% in FY24 toward ~12% by FY26.
• Diluted share count: 2.40–2.45B diluted; assume +1.5–2% annual growth net of buyback. Buyback pace likely accelerated during the November/December stock weakness; refresh of authorization probable in 2026.
• Valuation framework: Sum-of-the-parts — U.S. Commercial moves to 20–25x forward sales reflecting durable +115%-plus growth; U.S. Government 10–12x; International blended 6–8x. Blended fair value ~16–20x forward sales. At ~$147 (~20x our FY26 estimate), PLTR is now at the lower end of our blended fair-value range — a meaningful change from Q3 when the stock at ~$190 was 1.5–2 turns above.
• 12-month price target: Revised to $185 (range $150–$235) from prior $165. Above current price (~$147), reflecting the upgraded model assumptions and the materially improved entry-point asymmetry.

Thesis Scorecard Post-Earnings

Overall: Operating thesis decisively strengthened on every measurable dimension — the Q3 reset of long-term margin assumptions is now confirmed, the U.S. Commercial trajectory is locked in via FY26 guidance, the U.S. Government segment has joined the acceleration. The valuation thesis — the binding constraint through Q3 — has materially eased: the combination of the November/December drawdown plus the materially higher numerator (FY26 guide $7.18B vs. previous Street ~$6.22B) puts the multiple at ~20x FY26 sales / ~14x FY27, a level where the upside-downside asymmetry is finally compelling.

Action: Upgrading to Outperform from Hold. Both upgrade conditions we set in our Q3 note (drawdown to $140–150 without thesis impairment, OR one additional quarter of evidence on durability + margin) are now met. We are now structurally constructive on PLTR for the next 4–6 quarters — the highest-conviction window in our coverage history. Tactical risk: a sharp post-rally pullback in the next 2–4 weeks is plausible (sell-the-news dynamics on a +11% gap higher), and we would view a retracement to $130–135 as an additional add opportunity rather than a thesis-impairment signal. Risk to the upgrade: a Q1 26 print that materially undershoots the $1.534B guide midpoint would require revisiting the thesis, but management's posture of guiding to >+57% YoY in Q1 itself signals confidence in the trajectory.