Baird has moved Palantir Technologies Inc. (PLTR) from a Neutral rating to Outperform, assigning a price target of $200.00 following robust fourth-quarter results. The new target remains below the analyst high of $255, and InvestingPro data indicates the stock may be materially overvalued relative to its Fair Value.
The upgrade follows Palantir's tenth straight quarter of accelerating total revenue growth. The company reported a 70% year-over-year increase in total revenue for the fourth quarter, up from 63% in the third quarter, with management attributing much of the momentum to strength in the U.S. commercial business.
Over the last twelve months Palantir's revenue rose 47.23%, and analysts are forecasting roughly 54% revenue growth for the current fiscal year. Baird highlighted that Palantir's first-quarter guidance suggests additional acceleration, a development that contributed to the research firm's decision to become more constructive after previously sitting on the sidelines due to valuation concerns.
Free cash flow dynamics were central to Baird's rethink. The firm pointed to an expected free cash flow inflection and said that, under upside scenarios for 2027, Palantir could trade at attractive free cash flow multiples. Baird also described Palantir as "one of the clearest AI winners," underlining the role the company’s artificial intelligence positioning played in the upgrade.
Third-party data from InvestingPro was also referenced in Baird's context: InvestingPro shows Palantir with a "GREAT" overall financial health score and notes the availability of 20 additional ProTips that could assist investors in evaluating a company with volatile, AI-driven dynamics.
Palantir's reported fourth-quarter 2025 financials supported the more positive view. The company posted revenue of $1.407 billion, topping analyst expectations. Earnings per share were $0.25, beating the consensus forecast of $0.23. Those results reinforced the narrative of robust recent performance and the firm's ability to outpace modestly lower analyst estimates.
While valuation remains part of the discussion - evidenced by both Baird's prior caution and InvestingPro's fair-value comparison - the combination of accelerating revenue, improving quarterly guidance, a potential free cash flow inflection, and a favourable AI positioning led Baird to raise its rating.
Key points
- Baird upgraded Palantir from Neutral to Outperform and set a $200 price target, below an analyst high of $255.
- Palantir reported a tenth consecutive quarter of accelerating revenue growth - 70% in Q4 versus 63% in Q3 - driven mainly by the U.S. commercial segment.
- Baird emphasized a possible free cash flow inflection and labelled Palantir "one of the clearest AI winners," while InvestingPro data shows strong financial health but potential overvaluation versus Fair Value.
Risks and uncertainties
- Valuation remains a concern - InvestingPro data suggests the stock may be significantly overvalued relative to its Fair Value, which can affect returns for investors.
- Outcomes hinge on continued revenue acceleration and improvement in free cash flow; if guidance or execution falters, the bullish case could weaken.
- Palantir is described as a volatile AI player, which carries inherent execution and market-risk implications for technology and AI-focused investment strategies.
Overall, Baird's upgrade reflects a shift toward a product-and-cash-flow-focused view: accelerating commercial adoption in the U.S., better near-term guidance, a credible path to attractive free cash flow multiples under upside scenarios, and a clear AI positioning. At the same time, independent valuation signals temper enthusiasm, leaving investors to weigh growth and FCF potential against current price levels.