Palantir Technologies reports second-quarter earnings after the market closes tonight. Wall Street expects $1.81 billion in revenue, up 81 percent year-over-year, and earnings per share of 34 cents, more than double the 16 cents it earned in the same period last year. The company has beaten estimates eight consecutive quarters. The stock is at $123, down 40 percent from its November peak of $207.52.
The numbers will not be the story.
## The Clock
In March, the Pentagon designated Anthropic a supply chain risk and ordered all federal agencies to phase out Claude within 180 days. The order started a clock. That clock runs out in September.
Palantir's Maven Smart System, the AI targeting platform now designated a program of record across all 11 US combatant commands, was built on Claude. The prompts, the classification workflows, the intelligence analysis pipelines. When Trump banned the model, he banned it from the system the Pentagon depends on most.
Replacing it requires rewriting prompts, retraining classification layers, and recertifying cyber controls on classified networks. Joe Saunders, CEO of government contractor RunSafe Security, estimated the recertification process at 12 to 18 months. The Pentagon gave Palantir six. Michael Burry put it plainly: "The 6 month phase out was the military saying, we need Claude for a minute here."
Palantir is reporting tonight at the midpoint of that transition. Maven contracts exceed $1.3 billion through 2029. The Navy added $448 million for Ship OS. The platform generates targeting data for every combatant command from Central to Space. And it is mid-surgery.
## The Convergence
While the government business absorbs the transition, the commercial business is accelerating past it. US commercial revenue grew 133 percent last quarter. Analysts expect commercial revenue to match government revenue for the first time this quarter. By year-end, commercial is projected to account for 51 percent of total revenue. The company that started as a surveillance tool for intelligence agencies is becoming an enterprise software platform that happens to also run targeting for the military.
CEO Alex Karp wrote to shareholders in May: "Our financial results now demonstrate a level of strength that dwarfs the performance of essentially every software company in history at this scale." The full-year guidance stands at $7.66 billion, implying 71 percent growth.
## The Price
The stock trades at 149 times trailing earnings and 61 times sales. Fifteen analysts rate it Buy. The average target is $181, 47 percent above the current price. Options traders are pricing a 12 percent swing in either direction after tonight's report.
The premium is real. No other AI company holds program-of-record status across the entire US military while simultaneously growing commercial revenue at triple digits. The question is whether the premium survives the transition. The Pentagon created the problem by banning the model its own program was built on. Palantir has to solve it while growing 81 percent, replacing the AI backbone of an operational weapons system, and convincing a skeptical market that 149 times earnings is a discount.
The clock is the test. Not the earnings report tonight, though it will matter. Whether Palantir can outrun the transition deadline, replace the AI backbone of an operational weapons system, and convince a skeptical market that 149 times earnings is a discount for a company the Pentagon cannot replace. The six months run out in September. The numbers come out tonight.