Palantir just got its mojo back

• Palantir is basking in the glow of a stellar earnings report.
• Shares of the AI software firm popped 12% after it reported its best-ever quarter for revenue.
• Investors have been anxious for good news, with Palantir shares down sharply from the latest high.

It's been a rough few months for Palantir, but the AI software company looks like it's getting its groove back.

Exhibit A is the big stock surge Palantir saw on Tuesday, with shares popping as much as 12% as investors cheered its best quarter ever. Revenue came in at a record $1.4 billion, a 70% increase from the prior year. It also gave strong guidance for 2026, predicting $7.18 billion in revenue, ahead of expectations of $6.2 billion.

Speaking to CNBC on Monday, CEO Alex Karp said he believed the firm's financials marked "the best results" he was aware of in the tech sector over the last 10 years.

It's the kind of good news Palantir investors have been waiting for. The stock has been in the doldrums, sliding at the end of 2025 as the company attracted interest from short sellers and faced institutional selling pressure amid concerns about bloated tech valuations.

Shares were down 28% from their peak in early November through Monday, before Palantir reported earnings.

And Wall Street has been floored by the latest results.

Palantir's earnings mark the 10th straight quarter that revenue has accelerated, Morgan Stanley said on Tuesday. The bank lifted its revenue forecast for the stock for the next two years and reiterated its price target of $205, implying about 30% upside from the stock's current levels.

"PLTR is on course to reach $10B in revenue at the fastest growth rate and highest margins perhaps in sw history, underscoring its status as a clear AI winner," analysts wrote.

Bank of America concurred, reiterating its "buy" rating and $255 price target on the stock. Palantir's earnings could be a warning to other firms in the AI space that artificial intelligence endeavours need "to come with real results," the analysts said.

"While the market's relationship with AI companies continues to be volatile, we see these results cementing PLTR's place as one which will survive and thrive in the chaos," BofA wrote.

Truist called Palantir a "Conclusive AI Pure-Play Victor" in a note after the earnings.

"We view this momentum as further evidence PLTR is enabling AI adoption at scale for its customers, leading to discernible results," analysts wrote, adding that strong growth in Palantir's backlog gave them confidence about the firm's long-term trajectory.

The firm also reiterated its "buy" rating on Palantir and $223 price target, implying 39% upside from current levels.

Wedbush Securities' Dan Ives said Palantir's fourth-quarter results ended "Another Robust Year from Messi of AI."

"Palantir is helping lead the AI Revolution into the use case phase as its AIP product moat is unmatched in our view," he said in a note. The firm called Palantir one of its top tech stocks to own in 2026 and reiterated its "outperform" rating and $230 price target, implying 44% upside.

Some on Wall Street still see risks ahead for the AI darling, given Palantir's lofty valuation. Analysts at Jefferies said they saw potential downside given the stock's elevated forward earnings multiple.

"We view execution as strong, though at 39x CY27E rev, multiple downside outweighs fundamental upside, with more attractive stocks in our coverage," analysts wrote, reiterating their "underperform rating" and $70 price target, a drop of 56% from current levels.