Palantir (PLTR) Surpasses Blue-Chip Standard by 4x... What is the 'Rule of 40' that Hit 155%?

▲ Palantir (PLTR)/AI generated image

Palantir Technologies (PLTR) has raised its ‘Rule of 40’ score, which combines growth and profitability, to 155%. This is approximately four times the 40% typically considered a standard for a healthy software company.

According to Stocktwits on August 4 (local time), the Rule of 40 is calculated by adding the year-over-year revenue growth rate and adjusted operating profit margin or free cash flow margin. Generally, if the score exceeds 40%, the software company is evaluated as having both growth and financial health.

Palantir's Q2 revenue growth rate was 93%, and its adjusted operating profit margin was 62%. The Rule of 40 score, combining these two figures, reached 155%. The adjusted gross profit margin also reached 86%.

Palantir CEO Alex Karp stated, "This quarter was unreal." He added, "U.S. commercial revenue increased by 149% year-over-year, total revenue increased by 93%, and the Rule of 40 score rose to 155%." U.S. government revenue also increased by 90%.

Q2 revenue was $1.94 billion, surpassing market expectations of $1.81 billion. Earnings per share also exceeded market expectations of $0.35. Palantir raised its 2026 revenue forecast from a previous maximum of approximately $7.66 billion to $8.15 billion-$8.16 billion. This is higher than market expectations of $7.72 billion.

In recent investor materials, Palantir compared its Rule of 40 score with companies like Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), and AMD. However, this metric is not an official accounting standard, and calculation methods may vary by company. Palantir's stock price rose 16% in after-hours trading after the Q2 earnings announcement.

[Article Summary]

-Palantir's Rule of 40 score, combining a Q2 revenue growth rate of 93% and an adjusted operating profit margin of 62%, reached 155%.

-Q2 revenue was $1.94 billion, exceeding market expectations of $1.81 billion.

-Palantir raised its 2026 revenue forecast to a maximum of $8.16 billion, and its stock price rose 16% in after-hours trading.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*