Lowering targets, raising expectations... Citi rates Palantir (PLTR.US) "Buy" with a "Balanced" bullish view: Strong commercial and federal business, reiterates "Buy" rating

According to Zhihu Finance APP, as Palantir (PLTR.US) shares have fallen over 30% year-to-date and market enthusiasm for AI stocks continues to cool, Citi analyst Tyler Radke is bucking the trend with optimism. This long-time Wall Street bull on Palantir reaffirmed his “Buy” rating, while lowering his target price from $225 to $200. However, the reduction in target price is not due to pessimism—in fact, Radke significantly raised his earnings forecast for fiscal year 2027, expecting revenue to climb 53% year-over-year, far exceeding Wall Street’s consensus of about 45%. This seemingly contradictory move—to lower the target but raise expectations—reflects Palantir’s unique dilemma: accelerating fundamentals but valuations still digesting previous excesses. Palantir will report its latest quarterly results after the US market closes on August 3.

Q2 US Commercial: A Strong Rebound After “Unexpected Slowdown”

The core basis for Radke’s increased earnings expectations is the imminent strong rebound in Palantir’s US commercial segment. He wrote in his report: “We expect a rebound in US commercial business after the unexpected slowdown in Q1, driven mainly by a reprioritization of resources and the rollout of AIP initiatives across new industries and regions.” Radke further pointed out that communications with partners and management during the quarter were “generally positive,” as global systems integrators and independent software vendors continued strong momentum.

Citi expects that US commercial RDV (remaining deal value) will rebound quarterly, exceeding $800 million in net additions by the second half of 2025, further boosting FY2027 outlook. Specifically, Radke projects commercial revenue to grow 67% year-over-year in fiscal year 2027.

From a broader perspective, Palantir’s AI Platform (AIP) is moving from experimental deployments toward mission-critical infrastructure. The company’s Q1 2026 revenue increased 85% year-over-year, with US commercial revenue surging 133%. Palantir has raised its annual guidance twice and now expects 2026 revenue to grow approximately 71%.

AIPCon 10 & Client Expansion: Broad-Based Progress from Legal to Cloud

Radke’s report listed several positive signals: The significant achievements demonstrated at AIPCon 10, especially in the legal and new cloud verticals, were particularly noteworthy in client outcomes. This aligns with public information—Palantir highlighted production environment deployments with Kirkland & Ellis, McCarthy Building, the US Department of Agriculture and other institutions at AIPCon 10.

In international business, the order from GNP Seguros, a major Mexican insurer, stood out. GNP Seguros is Palantir’s first publicly announced commercial customer in Latin America and is using Foundry and AIP for claims fraud detection, risk monitoring, and underwriting optimization.

In cooperation with Nvidia, the partnership in the sovereign AI field has further deepened. Palantir recently announced an expanded strategic partnership with Nvidia, integrating Nvidia’s Nemotron open-source large models into its own AI tech stack, providing secure AI deployment solutions for US government agencies and critical infrastructure clients.

Federal Business: Dual Engines from Department of Defense and Department of Agriculture

Federal business is another growth driver favored by Citi. Radke noted that at the AWS Summit, there were observed expanding use cases with the US Department of Defense, while the contract with the US Department of Agriculture is expected to continue driving growth in the second half of the year.

Public information shows that Palantir recently won a contract with the Department of Defense worth up to $250 million, extending their partnership since 2018 with the Army. The UK Ministry of Defence also awarded Palantir a renewal enterprise agreement. In addition, Palantir, along with Anduril and Athea SAS, was selected by NATO to participate in its air defense data modernization project.

Radke commented: “Although churn among competitors has increased, we believe the growing roster of marquee customers will serve as a catalyst for ongoing business expansion.”

Valuation Controversy

Palantir’s valuation remains a central point of market contention. The company’s current forward price-to-sales ratio is about 31.47x, far above the industry average of 3.96x. The 34% share price plunge in H1 2026 largely reflects a correction of prior overvaluation.

However, Palantir’s fundamentals have not deteriorated. The company reported 2025 revenue of $4.48 billion, up 56% year-over-year; net profit $1.63 billion, up 252%. The Q1 2026 GAAP net margin reached 53%. Analysts expect Q2 revenue of around $1.81 billion, up 81% year-over-year, and earnings per share of $0.34, up 112.5% year-over-year.

Citi’s “lower target, higher forecast” approach essentially seeks a new balance between valuation multiple compression and accelerating profit growth. Radke lowered the target price from $225 to $200, citing multiple compression—yet $200 still implies about 62% upside from current levels.

The Q2 earnings report on August 3 will be the next key catalyst. Wall Street expects revenue of around $1.81 billion and earnings per share of $0.34. If Palantir delivers another beat and confirms the rebound in its US commercial business, the “more attractive risk-reward ratio” cited by Citi could be repriced by the market. Until then, this AI-driven data analytics giant will continue to seek balance between the “growth miracle” and “valuation digestion.”