PLTR — Earnings Review Q4 FY25

wsm007 | 2026-02-22 | Q4 FY25 (Dec-25) | Not Long PLTR

Verdict

The growth is real, the acceleration is real, and the operating leverage is real. This is an extraordinary business. The problem is the valuation — 70x TTM revenue, ~200x GAAP P/E — which is pricing in years of perfection that may or may not materialise. I do not own PLTR. I understand why people do, but I need a better entry. Watch, don't buy at current prices.

The Numbers

FY2025 full year: Revenue $4,475M (+56% YoY) | Adj Op Income $2,254M (50% margin) | GAAP Net Income $1,625M (36% margin) | Adj FCF 2, 270M(51640M (14% of rev)

Revenue Trajectory — The Key Read

Four consecutive quarters of accelerating growth — both YoY and QoQ. Each sequential add is larger than the prior. $226M added in Q4 alone. At this run rate, they're adding nearly $1B of annual revenue every quarter. Trajectory is unambiguously accelerating. Green flag.

Segment Breakdown

U.S. Commercial at +137% YoY is the story. AIP is working. Commercial has effectively reached parity with Government in Q4 ($507M vs $570M), and FY26 guidance has Commercial growing at 115% vs implied Government at ~29%. By mid-FY26, Commercial will be the larger segment. This is a structural shift — from government contractor to enterprise AI platform.

Leading Indicators — Bullish Divergence

TCV at +138% vs revenue at +70% is the textbook bullish divergence. Contracted backlog is growing 2x faster than revenue recognition. RDV at $4.38B is 3.3 quarters of U.S. Commercial revenue. The pipeline is not just growing — it's accelerating ahead of revenue. Leading indicators are screaming.

Margins: GAAP vs Non-GAAP Discipline

The 57% adj op margin is impressive but I always look at the GAAP gap. SBC is ~$640M in FY25 (14% of revenue). That's real dilution, real cost.

Eish — 16pp gap between adj and GAAP is meaningful. At 640MSBCona 320B market cap, the dilution rate is ~0.2% per year, which is genuinely low given the scale. But the adj margins flatter the picture. GAAP op margin of 41% at 70% growth is still extraordinary — and it's expanding fast too. On GAAP terms, this business is also exceptional. The SBC concern is real but not fatal.

FCF conversion: FCF (791M) > NetIncome(609M) in Q4. FCF/NI ratio of ~130%. Government multi-year advance contracts create this dynamic. High-quality earnings.

FY26 Guidance Assessment

Guide of +61% at $7.2B run rate is historically unprecedented for enterprise software. If they hit it, PLTR will have grown >50% for three straight fiscal years at multi-billion revenue scale. The confidence in the FY26 guide is signal — management wouldn't guide $7.19B against a $6.9B consensus unless they have strong pipeline visibility. RDV of $4.38B in U.S. Commercial alone supports this.

Q1 FY26 guide: $1,534M midpoint = 9% sequential growth from Q4's $1,407M. That implies a step-down in QoQ (19% → 9%), which is normal seasonality. YoY implied: 1, 534M/ 884M (Q1 FY25) = +73% YoY. Further acceleration if achieved.

Valuation — The Problem

Run-rate valuation (Q4 × 4):

• Run-rate Revenue: 5, 627M|Marketcap 320B → P/S = 56.9x
• Run-rate FCF: $3,164M | P/FCF = 101x
• Run-rate GAAP Net Income: $2,436M | P/E = 131x

Even on forward FY26 numbers ($7.19B revenue, $4.0B FCF): 44x P/S, 78x P/FCF. These are 3-5x the multiples of other high-quality SaaS businesses. The growth justifies a premium — but not this premium.

The growth-adjusted math: At 70% growth, 70x EV/Rev = 1.0x PEG on revenue (not earnings). For comparison, CRDO at 12x EV/Rev on 60% growth is 0.2x. You're paying 5x more per unit of growth for PLTR. That gap needs to compress.

What I need to buy: If PLTR were at 30-40x TTM revenue (~$140-180B market cap, roughly half current), the risk/reward becomes interesting. That's a 40-50% drawdown from here. Given the growth profile, I'd be very interested around 60 − 80/share(assumingcurrent 115 price).

What I Got Right and Wrong vs Atlas

Atlas verdict: Conviction 3. My read: aligned. The business merits a 5; the valuation caps it at a 3.

Where I add nuance:

1. GAAP vs Non-GAAP discipline: Atlas flags SBC at $640M. I go further — the 16pp GAAP vs adj gap is the largest concern. GAAP op margin of 41% is still elite, but investors need to not confuse 57% adj with economic reality.
2. Q1 FY26 implied YoY: Atlas doesn't compute this. At $1,534M midpoint vs $884M Q1 FY25, that's +73% YoY — potential further acceleration, not deceleration.
3. Commercial parity thesis: By Q2 FY26, U.S. Commercial will likely surpass Government as the larger segment. This re-rates the narrative entirely. The market hasn't fully priced this in.
4. Entry price: I'm more explicit — 40-50% drawdown creates an interesting setup. Without that, pass.

Red Flags / Watch List

1. Valuation at 70x TTM revenue. Any growth scare → 30-50% drawdown. Stock already down 27% from highs.
2. Government concentration risk. DOGE/budget scrutiny could cut both ways — could hurt or help depending on how AI contracts are classified.
3. SBC at 14% of revenue. Not falling fast enough. Needs to drop to <10% as revenue scales.
4. No NRR disclosure. Can't assess cohort health. U.S. Commercial growth of +137% implies massive expansion, but we're flying blind on churn.
5. Margin jump from 33% to 57% in one quarter. Some of this may be timing/deal mix. Verify it sustains in Q1 FY26.

Bottom Line

Business: Exceptional. Accelerating growth at scale + operating leverage + leading indicators all pointing up. The AI thesis is not hype — it's showing up in contracted pipeline. U.S. Commercial inflection is real.

Valuation: Prohibitive. 70x TTM revenue is where growth dreams go to die. Even on generous FY26 numbers it's 44x forward revenue. Pass at current price.

Action: Watch. Alert at $65-80/share for serious look. If entered: concentrate in LEAPS (Jan'28 strikes), not common. Growth this durable deserves asymmetric exposure, not capital at 70x revenue.

-wsm (Not long PLTR)