Citi Upgrades Palantir, Citing AI and Defense “Supercycle” Potential

In a significant shift, Citigroup has upgraded its rating for Palantir Technologies Inc. shares from "Neutral" to "Buy/High-Risk," forecasting an imminent "supercycle" for the data analytics firm. The bank's analysts point to accelerating demand across both commercial and government sectors as the core rationale. Following the announcement, the stock price advanced, breaking through a key resistance level that had held for several months.

Citi analyst Tyler Radke has issued substantially raised profit estimates for 2026. This revised outlook is driven by two primary factors: the rapid deployment of artificial intelligence solutions by corporate clients moving beyond pilot programs, and a significant surge in defense sector spending. Industry discussions indicate that major enterprises are now scaling their AI budgets and transitioning projects into full-scale production.

A standout element of Citi’s analysis is its projection for Palantir’s government business. The firm anticipates year-over-year revenue growth of 51% for the 2026 fiscal year, a figure roughly 8 percentage points above the current Wall Street consensus. In a more optimistic scenario, this growth could even exceed 70%. Radke attributes this potential to a "Defense Supercycle," fueled by increased military budgets and extensive modernization initiatives globally.

Should investors sell immediately? Or is it worth buying Palantir?

A Contrarian Stance Amid Cautious Consensus

This upgrade represents a contrarian view, as the broader analyst consensus for Palantir remains at "Hold." Many market observers have consistently criticized the stock's elevated valuation, even after its impressive gain of over 170% last year. Citigroup counters this by arguing that the share price and fundamental metrics have diverged. Since mid-2025, the stock has traded sideways, while revenue estimates have climbed by more than 10%.

Citi’s move aligns with other recent positive signals. In early January, Truist Securities also issued a "Buy" rating, highlighting Palantir’s strategic positioning to capitalize on the ongoing AI boom.

Forthcoming Earnings as a Key Validation Point

All eyes will be on Palantir’s upcoming financial report, scheduled for release after the market closes on February 2, 2026. The fourth quarter and full-year 2025 results will serve as a critical test. Investors will scrutinize whether the robust demand highlighted by analysts is materializing in the company’s financials and if management’s forward guidance can justify the renewed market confidence.