Deutsche Bank raises Palantir's target price to $225 as Q3 revenue guidance increases by 83%.

Written by: Rita

The market is bearish on AI software companies' ability to monetize, but Deutsche Bank believes Palantir is stuck between models and enterprise workflows, with its model-agnostic positioning enabling it to consistently extract excess returns from token flows. The company's midpoint revenue guidance for the third quarter is $2.162 billion, an 83% year-over-year increase. Commercial revenue growth is expected at 105%, while government revenue growth is projected at 65%. The price target has been raised from $200 to $225, with a Buy rating maintained.

Tokens are the basic units of text processed by large language models; growth in token expenditure indicates that enterprises are increasing both the frequency and scale of their model calls. After deploying agent applications into production, enterprises experience synchronized increases in model calls, data interactions, and governance demands. Palantir’s Artificial Intelligence Platform (AIP) and Ontology Platform sit directly between the models and customers’ production workflows, managing how model calls interact with proprietary data and take action. Deutsche Bank believes that the more agent applications deployed, the greater the strategic value and potential consumption for Palantir’s platform.

Commercial momentum and government business provide short-term support; guidance for the third quarter is conservative, making an upside surprise likely. Valuation still has room to rise, with risks centered on competition, macroeconomic factors, government spending, and execution.

Unlike AI applications that rely on a single model, Palantir allows customers to retain control over their data, business logic, permissions, and workflows, while maintaining the flexibility to switch underlying models. Ontology serves as a public control layer that connects these elements, enabling customers to use multiple models without surrendering proprietary data, prompts, feedback, or institutional knowledge.

Deutsche Bank attended Palantir’s second Sovereignty Bootcamp in New York, where customer demonstrations and management discussions reinforced the view that enterprises increasingly seek model agnosticism and retain control over their proprietary data and workflows that constitute their alpha. Deutsche Bank noted that leading model providers have recently introduced zero-data-retention and private secure processing features, indicating rising customer demand for data control—aligning with Palantir’s sovereignty narrative.

AIP Evolve is a key product in implementing this strategy. It evaluates AI workflows across four dimensions—quality, cost, latency, and control—testing the performance of cutting-edge, open-source, and proprietary models against customer-specific benchmarks, then identifies opportunities: rerouting or optimizing prompts, fine-tuning models, or replacing unnecessary model calls with deterministic code. As a result, customers gain greater model mobility, enabling them to adopt optimal models without rebuilding surrounding workflows. AutoTune fine-tunes models within customer environments using governed feedback. Deutsche Bank believes that Palantir’s support for multiple models, evaluation-driven routing, controlled fine-tuning, and partnership with NVIDIA position it favorably to help enterprises reduce inference costs, minimize vendor dependency, and retain ownership of AI-generated intelligence.

Commercial revenue is expected to reach $1.122 billion in the third quarter, representing a 105% year-over-year growth, with the sequential growth rate slowing by 5 percentage points compared to the second quarter, due to a 26 percentage point higher base comparison. In the second quarter, commercial revenue in the U.S. grew 149% year-over-year and 28% sequentially, with total contract value (TCV) reaching $2.132 billion and remaining performance value (RPV) increasing 124% year-over-year. Deutsche Bank believes these figures indicate that commercial opportunities are expanding across geographies, industries, and distribution channels.

Partners are expanding their implementation capabilities. Palantir has expanded its collaboration with PwC to focus on enterprise AI, merger and acquisition transformation, and enterprise resource planning modernization. Palantir has deepened its relationship with Fujitsu, which has become a global Frontline Deployment Engineer (FDE) partner and previously helped a client integrate over 3,000 suppliers and 18 factories, saving more than $10 million in costs within one year. Deutsche Bank believes that the announcements from PwC and Fujitsu are particularly significant, as partners can expand implementation capacity and alleviate shortages in Frontline Deployment Engineer resources during periods of heightened demand.

AIPCon 11 showcased deployments in aviation, insurance, healthcare, manufacturing, media, customer intelligence, and supply chain. Deutsche Bank believes that commercial traction is expanding, supported by growing partnerships and an increasing number of deployment cases, underpinning the sustainability of commercial revenue.

Pentagon officials attribute part of Maven’s user growth to demand following Operation Epic Fury. Maven surpassed 100,000 U.S. defense users in September, up from approximately 50,000 in January—an increase of more than double. Maven supported targeting decisions involving 13,000 targets within 38 days and is being rolled out across military commands and the National Guard.

The Marine Corps expanded its Maven enterprise license effective October 1 to cover authorized personnel across relevant commands and applicable networks. The Army advanced TITAN from prototype to production, awarding Palantir a $1.27 billion contract for production leadership and integration of eight initial AI targeting systems, with delivery expected within 18 months and additional production orders anticipated by 2027. Deutsche Bank believes that the rapid growth of Maven users and TITAN’s transition to production indicate Palantir is becoming more deeply embedded in defense decision-making, with government business remaining a durable growth pillar, though contract awards and revenue recognition will fluctuate quarter to quarter.

Deutsche Bank is not highly confident in the magnitude of the upside to third-quarter revenue, but given the company’s historically conservative guidance, assuming a 3% to 5% beat over the midpoint of guidance is reasonable. A 3% to 5% beat corresponds to revenue of $2.227 billion to $2.270 billion, representing year-over-year growth of 86% to 90%, slightly slower than in the second quarter. Deutsche Bank’s base case assumes a 4% beat, resulting in revenue of $2.248 billion, up 90% year-over-year and 16% quarter-over-quarter, exceeding the three-year average Q3 sequential growth rate of 10%.

Revenue acceleration has not been entirely ruled out. A 6% upside corresponds to revenue of $2.292 billion, representing a 94% year-over-year growth and a 1-percentage-point sequential acceleration, requiring a smaller dollar upside than in Q2. Deutsche Bank expects commercial revenue to grow 105% year-over-year and government revenue to grow 65% year-over-year, broadly in line with market expectations. Non-GAAP operating profit is expected to exceed the midpoint of guidance by at least $1.294 billion, with a margin nearing 61%, expanding approximately 10 percentage points year-over-year and setting a new record. Gross margin is projected at 86.5%, up 270 basis points year-over-year but down 20 basis points sequentially. Non-GAAP operating expenses are expected at $576 million, up 48% year-over-year, within the midpoint of guidance.

Deutsche Bank uses discounted cash flow (DCF) valuation with a weighted average cost of capital of 9.75%, a long-term risk-free rate of 4%, an equity risk premium of 5.75%, and a perpetual growth rate of 3.5%, based on GDP growth. The target price has been raised from $200 to $225, compared to the current share price of $196.75, representing approximately a 14% upside. Deutsche Bank maintains a Buy rating.

Risks include intensified competition from frontier AI labs and traditional software providers, macroeconomic deterioration, changes in U.S. government spending, and execution risk. Deutsche Bank believes Palantir’s model-agnostic positioning and token flow alignment enable it to maintain value amid rapid AI model iteration. Strong commercial revenue growth, accelerating penetration in government business, and conservative Q3 guidance provide near-term support. The raised target price reflects Deutsche Bank’s confidence in the sustainability of growth.

Palantir's alpha comes from the control layer; replacing the model cannot change this position.

Disclaimer

This article is a compilation and interpretation by Chaoxiang Research of a third-party brokerage research report (Deutsche Bank, October 26, 2026), combined with publicly available market information. The ratings, price targets, earnings forecasts, and related judgments cited herein reflect the views of the brokerage’s analysts and represent the position of their respective institution, not the views of Chaoxiang Research, nor do they constitute any investment advice.

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