Palantir’s impressive results are making the rest of the software sector look bad. Markets could do with a few more artificial-intelligence success stories this earnings season if investors are to buck their worries
about the AI trade.
The data-analytics company’s revenue growth outstripping peers is hardly a surprise by now. The key was the commercial revenue more than doubling, showing it isn’t reliant on lumpy government
contracts. That makes it the rare software company that can point to unambiguous independent AI success.
AI has a big software problem. No matter how many partnerships the likes of Salesforce and ServiceNow sign with OpenAI and Anthropic, they can’t soothe shareholders’ fears that they are paving the way for their own replacements. So money is fleeing from software—a sector populated by
public companies with traditionally high margins and deep moats—to AI model providers, an area dominated by lossmaking private companies engaged in cut-throat competition.
Figuring out how to invest in such a market is tricky. Just look at Elon Musk’s merger of his SpaceX and xAI companies. The combined company is valued at $1.25 trillion, with AI company xAI comprising $250 billion of that, according to The Wall Street Journal. Even if an investor is tempted by Musk’s vision of data centers in space, it’s not easy to figure out how to get exposure or what price to put on the component parts. Musk’s previous combinations of SolarCity with Tesla and X —formerly Twitter—with xAI point to a checkered history of value creation via mergers.
Until now, chip companies have been the favored play on the growth of AI. But semiconductor makers and their
customers are increasingly entwined. See for example Nvidia, which acts as both supplier and investor for OpenAI and Anthropic—leading to a tricky dance between the parties as they jostle for commercial advantage while avoiding an open breach that would panic investors.
Palantir’s clean AI growth story is so rare that it commands a sky-high price-to-earnings ratio. Investor appetite for alternatives is there, if any other company can step up to the plate this earnings season.
—Adam Clark
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Palantir’s Quarterly Revenue Exceeds $1 Billion Amid AI Surge
Palantir, the data analytics company, handily beat expectations for the December quarter and is forecasting 2026 revenue significantly above Wall Street targets. CEO Alex Karp says financial results are exceeding even their most ambitious expectations amid strong AI demand.
- Fourth-quarter revenue jumped 70%, to $1.4 billion and adjusted earnings were 25 cents a share. Sales in the U.S. market rose 93% from a year ago, with commercial revenue up 137%. Sales to the U.S. government rose 66%.
- The company’s roots are in intelligence and defense
work, and Palantir has seen an acceleration of its already extensive contracts with the U.S. federal government. Most recently, in December, the company announced a new contract with the U.S. Navy, valued at up to $448 million.
- But Palantir has expanded beyond its government roots as large companies struggle to manage and
interpret the seas of data they produce every day. This may be Palantir’s biggest opportunity, because all large data-rich organizations can benefit from its software. The U.S. is again the core market here.
- Few analysts doubt that Palantir has a long runway for commercial success, but there is concern surrounding its valuation. At a forward price-to-earnings multiple of about 145, it is among the most richly valued stocks, though still behind Tesla’s 206 multiple.
What’s Next: Palantir sees 2026 revenue rising
61%, to a range of $7.18 billion to $7.198 billion as commercial revenue is forecast to more than double. For the current quarter, Palantir sees revenue of between $1.53 billion and $1.536 billion.
—Adam Levine and Liz Moyer
Elon Musk Combines SpaceX and xAI in Data Center Move
Elon Musk’s SpaceX announced it has acquired his artificial intelligence firm xAI ahead of a potential midyear initial public offering of SpaceX stock. The idea, once seemingly far-fetched, is all about AI. SpaceX is
planning to raise capital to expand its AI ambitions, including building data-center capacity in space.
- SpaceX recently filed an application to build a “space cloud” of up to 1 million satellites. That’s roughly 100 times the scale of its space-based broadband product, Starlink. It would harness the sun’s energy and the
cold vacuum of space to free AI computing from Earthly electricity supply and cooling.
- Musk’s AI firm has been valued at $200 billion in recent funding rounds, while SpaceX is reportedly seeking an IPO valuation as high as $1.5 trillion. That would value SpaceX at roughly 60 times estimated 2026 sales. Bloomberg reported the combined valuation of SpaceX-xAI at around $1.25 trillion.
- The combination could boost Tesla’s stock if it drives hopes of convergence among Musk’s various companies. Tesla’s fourth-quarter earnings call focused heavily on AI-linked opportunities, including robo-taxis and humanoid robots, while it is scaling back its EV product line.
- In a blog post announcing the merger, Musk said SpaceX acquired xAI to form an ambitious vertically-integrated innovation engine on (and off) Earth, “scaling to make a sentient sun to understand the Universe and extend the light of consciousness to the stars!”
What’s Next: SpaceX has already invested
$2 billion in xAI, and last week Musk’s Tesla said it was investing the same amount. The merger is a share exchange, The Wall Street Journal
