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Palantir, the data analytics, AI software, and defense and intelligence contractor, had a lot to live up to with its earnings report after the bell Monday, as Wall Street expected the kind of outstanding growth that has driven the company’s shares to rise more than 500% over the past year.  Luckily for Palantir and all its investors, the report was very good.Before the earnings hit, the company’s 104% year-to-date gain was enough to make it the top-performing stock in the S&P 500. For what it’s worth, its 340% gain last year also made it No. 1 in 2024 after joining the index in September. That run has pushed Palantir into the elite echelon of Corporate America and made shareholders roughly $300 billion wealthier in just the last 12 months. At least on paper.But it has also pushed Palantir’s valuation — as measured by price-to-sales and price-to-earnings ratios — to arguably lunatic levels, on par with some of the nosebleediest peaks of the tech stock bubble of the late 1990s and early 2000s. Another way to say it: Palantir is the most expensive stock in the S&P 500.One chink in Palantir’s armor is its largest customer: the US government. When news hit that the government was looking to reduce its reliance on key contractors like Palantir, the stock whipsawed. On the other hand, the government can be a very profitable customer; late last month, the US Army and Department of Defense announced a 10-year software procurement deal with Palantir that has a ceiling of $10 billion, which would be among the company’s largest deals ever.

THE TAKEAWAY Palantir’s current valuations imply remarkable confidence from investors that the company will be able to produce exceptionally fast growth alongside exceptionally fat profit margins for most of the next decade — something exceptionally difficult to do in a supposedly competitive market economy. Yet once again, Palantir looks to have surpassed expectations, and the stock rose in after-hours trading as it not only beat analysts’ predictions, but, almost equally important in the current market environment, boosted its guidance for the future as well.