Palantir Technologies Inc. (NYSE:PLTR) shares rose in early trading on Friday following a Wall Street analyst’s price target revision. This revision was based on the company’s strong second-quarter earnings report and a significant partnership with Microsoft Corporation (NASDAQ:MSFT). Palantir, which has already raised its annual profit forecast twice this year, has successfully navigated recent market volatility caused by currency trade fluctuations.

Earnings Report and Strategic Expansion

Palantir reported a record quarterly profit of 6 cents per share for the three months ending in June, with revenue increasing 27% to $678 million. This growth was driven in part by increased demand for its AIP Logic platform, which enhances AI-related strategies. The commercial division’s sales soared by 55%, reflecting success in expanding beyond its traditional government customer base.

The company also revised its full-year sales forecast to approximately $2.75 billion, slightly higher than previous estimates, and adjusted its profit from operations to between $966 million and $974 million. This positive outlook came just before Palantir announced a new partnership with Microsoft, which will integrate Palantir’s products into Microsoft’s Azure cloud services for government customers. Palantir will also implement Azure’s OpenAI technology in classified environments for its government and intelligence clients.

Analyst Insights and Future Projections

Wedbush analyst Dan Ives believes this partnership will accelerate Palantir’s AI implementation and broaden its reach within the federal sector. He sees this deal as a significant opportunity for Palantir’s AIP platform to gain traction with the Department of Defense and other federal agencies in the coming months.

Citigroup analyst Tyler Radke raised his price target for Palantir shares by $2 to $30, attributing the company’s strong second-quarter performance to its government contracts. Radke highlighted that Palantir’s approach, aided by AIP, has tapped into emerging AI spending, contributing to record net additions of large customers and a significant rebound in US commercial performance. Despite these positive developments, Radke cautioned that the stock’s high valuation, with a next 12 months revenue multiple of 19 times and an enterprise value to free cash flow ratio of about 60 times, may limit future returns.

Palantir’s shares were up 0.58% in early Friday trading, bringing the stock’s year-to-date gain to approximately 73%.