Key Points
Palantir earned $1.17 a share over its last four reported quarters, almost four times what it earned in the four quarters before that.
Even at their low in the past year, Palantir shares cost around 120 times earnings.
If quarterly earnings just stayed flat, the stock could grow into that valuation without falling at all.
Shares of Palantir Technologies (NASDAQ:PLTR) ended Oct. 9 at $209.05, their highest close ever. They've dipped since. But at around $198 as I write, the stock still sits only about 5% under that high.
It's easy to see why investors keep paying up. The artificial intelligence (AI) data and analytics specialist grew its second-quarter revenue 93% year over year, and its profits rose even faster.
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But at today's price, investors pay around 170 times earnings for it, going by what Palantir earned in the last year -- more than I'm willing to pay.
At what price, then, would the stock become a buy for me?
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Palantir's profits keep climbing
Highlighting how fast the company is scaling, Palantir's second-quarter earnings per share more than tripled year over year, up from $0.13 to $0.41. Net income grew a bit faster still, hitting around $1.06 billion versus about $327 million in the year-ago quarter. Earlier quarters showed the same climb. Palantir's quarterly earnings per share rose from $0.18 in the third quarter of 2025 to $0.24 in the fourth quarter, then to $0.34 in the first quarter of 2026 before hitting $0.41 in the second.
Add those four quarters up, and Palantir earned $1.17 per share over the last year. That's almost four times the $0.30 per share it earned in the four quarters before.
I'll use that trailing $1.17 as my earnings figure, because it's what the company reported, not an estimate.
Of course, the quarter-to-quarter gains are shrinking. Earnings per share rose around 42% from the fourth quarter to the first quarter, but only about 21% from the first quarter to the second.
Even for a business growing so fast, paying about 170 times earnings of $1.17 a share is a lot for profits that have already been booked.
What did investors pay at the low?
To choose a valuation multiple, I don't have to guess what a fast-growing software business might deserve. Palantir showed what investors were willing to pay for it just a few months ago.
On June 25, shares ended at around $107, the lowest closing price over the last 12 months. At that time, Palantir's trailing earnings per share came to $0.89, based on the four quarters through March. So, even near the bottom of a tough first half, investors paid around 120 times earnings.
That's still a rich price-to-earnings multiple. But it's one the market has already accepted for this business during a time when sentiment was weak -- and just weeks before Palantir posted 93% revenue growth for the second quarter.
Apply that 120 times earnings to Palantir's trailing earnings per share of $1.17, and you get around $140 a share, or about 29% under today's price.
The stock might not need to fall
A 29% drop is one way to get there. The stock has fallen more than that recently, losing around 34% of its value in the first half of 2026.
But earnings might do the job instead. The quarter that drops out of the trailing total next is the third quarter of 2025, when Palantir earned $0.18 a share. If quarterly earnings per share just stayed at the second quarter's $0.41 for three more reports, trailing earnings would climb to about $1.64. At 120 times earnings, that's about $197 -- right around where the stock trades today. If earnings keep growing instead, it might get there earlier.
Management's forecast suggests profits aren't stalling, either. For the third quarter, Palantir guided for non-GAAP (adjusted) operating income of around $1.29 billion. That would be around 8% over the second quarter's adjusted number and more than twice the year-ago quarter's.
Of course, nothing guarantees earnings stay at that level. Quarter-to-quarter earnings growth is already cooling. And Palantir booked hardly any income tax expense in the second quarter -- around $15 million on about $1.08 billion in pre-tax income. If its tax rate climbs, earnings per share could grow slower than operating profit does.
In the end, Palantir is executing about as well as any software company I track. The catch is that today's price arguably assumes it keeps this up for years.
So, I'd consider buying Palantir stock at around $140 per share, or about 120 times its earnings for the last four quarters. If these earnings keep rising, that price should rise with them. At around $198 today, the stock still sits far above it.
Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.