Both Palantir Technologies Inc. PLTR and Coherent Corp. COHR are major players in the AI and data infrastructure space.
Palantir is a leading provider of enterprise-level artificial intelligence software, specializing in data integration, large-scale analytics, machine learning operations, and decision-making platforms. Its core platforms — Palantir Gotham, Foundry and Artificial Intelligence Platform — are specifically built to empower organizations in both government and commercial sectors to harness the power of their data through real-time decision intelligence and AI-driven operations.
Coherent is a critical supplier of optical and semiconductor technologies, with increasing relevance in AI hardware infrastructure. Its products include high-speed optical transceivers, lasers, compound semiconductors and advanced substrates, all of which are essential for the high-bandwidth, low-latency data transmission required in AI-centric applications such as data centers, autonomous systems and edge computing.
PLTR: AI Infrastructure Dynamics, Strong Profitability
Palantir increasingly resembles an AI infrastructure provider rather than a conventional SaaS business. As artificial intelligence models become more accessible and commoditized, organizations may place greater importance on platforms capable of integrating, managing and operationalizing those models effectively across large-scale workflows.
This shift could work heavily in Palantir’s favor. Once deployed, the company’s platforms generate powerful scaling dynamics because incremental usage carries relatively low additional costs. That helps explain how Palantir continues expanding margins even during hypergrowth.
Its Rule of 40 score of 145 further highlights the unusual economics of the business. Very few companies in technology history have managed to sustain such elevated growth rates while simultaneously maintaining exceptionally high free cash flow margins. This combination increasingly supports the argument that Palantir deserves to be viewed differently from traditional software firms.
The most striking aspect of Palantir’s recent quarter was not just its 85% revenue growth but the extraordinary profitability achieved alongside that expansion. The company reported adjusted operating margins of 60%, adjusted free cash flow margins of 57% and a GAAP net margin of 54% while generating $1.63 billion in revenues. Such profitability levels remain extremely rare among rapidly scaling software companies, which typically experience margin compression as operating expenses rise.
Management’s forward outlook further strengthened the bullish narrative. Palantir guided for approximately $7.66 billion in fiscal 2026 revenues alongside projected adjusted operating income exceeding $4.44 billion and adjusted free cash flow of around $4.4 billion. These projections suggest Palantir could soon generate more free cash flow annually than many mature software companies produce from their entire operations.
Underlying customer metrics also continue to reinforce the long-term growth story. The company’s net dollar retention rate climbed to 150%, signaling strong expansion among existing customers. Additionally, U.S. commercial remaining deal value surged 112% year over year, indicating that enterprises are significantly increasing adoption of Palantir’s Artificial Intelligence Platform after initial deployment success.
COHR: AI-backed Demand, NVIDIA Deal, Industrial Weakness
Coherent's growth story is increasingly being driven by its datacenter & communications business. In the third quarter of fiscal 2026, this segment accounted for 75% of total revenues and grew 41% year over year, supported by strong demand from hyperscalers and AI infrastructure customers. This shift toward a faster-growing and higher-demand market improves the company's growth profile and provides greater visibility into future earnings.
Adding to the bullish outlook, Coherent recently entered into a multi-year partnership with NVIDIA NVDA focused on advancing optical networking technologies. As part of the agreement, NVIDIA will invest $2 billion in Coherent to support research and development, manufacturing capacity expansion and operational growth in the United States.
The partnership represents a significant vote of confidence from one of the world's leading AI companies. Beyond the immediate financial benefits, the deal reinforces Coherent's strategic importance within the rapidly expanding AI ecosystem. It also enhances revenue visibility and strengthens the company's position as demand for high-performance optical solutions continues to rise.
However, investors should not overlook the challenges facing Coherent's industrial business. Revenues in the segment declined 19.1% year over year in the third quarter of fiscal 2026, extending a downturn that has persisted for several quarters. The weakness highlights the uneven nature of the company's growth.
As a result, Coherent remains increasingly dependent on AI-related demand. While the datacenter & communications segment is performing exceptionally well, any slowdown in AI infrastructure spending could expose the company's limited diversification and place pressure on overall revenue growth.
How Do Zacks Estimates Compare for PLTR & COHR?
The Zacks Consensus Estimate for Palantir’s current year sales and EPS indicates year-over-year growth of approximately 72% and 99%, respectively. This indicates a solid performance trajectory, with EPS estimates trending upward over the past 60 days, signaling increased optimism from analysts about Palantir’s continued profitability and operational leverage, particularly as demand for its AI-driven platforms accelerates.
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In comparison, Coherent’s current-year sales are projected to grow about 21.5% year over year, a notable figure though more modest than Palantir’s top-line growth. EPS is expected to rise about 55% year over year. Like Palantir, EPS estimates for Coherent have also been trending higher over the past 60 days, reflecting growing confidence in its earnings recovery, particularly amid the AI-fueled surge in demand for high-speed optical components and data center infrastructure.
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Coherent’s Valuation More Attractive Than Palantir
COHR is currently trading at a forward 12-month P/S ratio of 8.66X, which is well above its 12-month median of 4.04X. In contrast, PLTR holds a much higher forward 12-month P/S ratio of 31.14X, though still below its median of 67.9X. Coherent appears far more attractively priced from a valuation standpoint.
Verdict: Palantir is the Better AI Bet
Both Palantir and Coherent are benefiting from the rapid expansion of artificial intelligence, but Palantir appears better positioned for long-term investors. The company combines exceptional revenue growth with industry-leading profitability, strong customer expansion trends, and increasing adoption of its AI platforms across both government and commercial markets. Its ability to generate substantial cash flow while continuing to scale sets it apart from most technology companies.
Coherent remains a compelling participant in the AI infrastructure buildout and should continue benefiting from demand for optical networking solutions. However, its greater reliance on AI-related hardware spending and ongoing weakness in its industrial segment create a less balanced growth profile. While Coherent remains a solid Hold, Palantir's superior execution, profitability, and AI platform momentum make it the more attractive Buy for investors seeking long-term exposure to the AI revolution.
While PLTR carries a Zacks Rank #2 (Buy) and COHR carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
