Palantir Obliterates Rule of 40 With 94% Score

Good Afternoon. Another strong week for the markets, with all major indices reporting significant gains thanks to strong earnings. The S&P 500 recorded its best week since the end of June. The Nasdaq Composite, powered by Apple’s performance this week, closed near an all-time high, with the Nasdaq 100 also closing at an all-time high.

Below are the key things to note this week:

Tim Cook’s Lesson: The Apple CEO gave a lesson to the whole world this week on how to handle President Trump. He went to the White House to announce Apple’s planned investments in the US, with an additional $100 billion, and also gifted Trump a U.S.-made souvenir with a 24-karat gold base. This should prevent Apple from incurring any additional tariffs, and iPhone prices should remain stable. Thanks to this, Apple stock had a great week after a long time, and helped push the Nasdaq near an all-time high.
 

Palantir Crushes Results: I've discussed Palantir multiple times before. This week, it reported earnings and crushed the Rule of 40 by more than 2X with a score of 94. The Rule of 40 means the revenue growth rate and profit margin (typically EBITDA) should equal or exceed 40%. This company continues to be in its league and attracting unprecedented valuations thanks to it.

Palantir Investor Presentation

Sam Altman’s Facebook Moment: ChatGPT launched its much-awaited GPT-5 model this week. Many users have pushed back, expressing dissatisfaction with GPT-5 and demanding the return of GPT-4. I mentioned in the past how Mark Zuckerberg faced backlash after changes to Facebook in its initial days, but he stuck with them over time, as people accepted new changes, and Mark was proven right. Sam Altman will now have to pass the same test, and if GPT-5 is accepted over time and proves to be significantly better than the previous version, it will confirm Sam Altman's authority in the AI space.

Soft Economic Data: It was a quiet week with very few macro data releases. However, both the services PMI and unemployment claims data points came in softer than expected. This suggests that the restrictive Federal Reserve policy is beginning to have an impact on the economy. This will bolster the case for the rate cuts in September, which almost seem like a done deal unless the CPI comes unexpectedly high next week. The probability of a rate cut at the next meeting is above 91%, according to the CME FedWatch.

CPI: Next Tuesday, the July CPI numbers will be released. The consensus forecast for YoY CPI is 2.8%. Even though CPI is not the Fed’s official gauge, as it’s released earlier, it gets a lot of coverage. I don’t expect it to rise above the consensus estimates and will be the most critical factor for the market’s direction next week.
 

For the week:

• The S&P 500 is up 2.43%, the Nasdaq is up 3.87%, and the Dow 30 is up 1.35%.

  

  Source: Barchart

CNN's Fear & Greed Index now stands at 59 (Greed) out of 100, up 9 points from last week. Details here

The top five trending stocks on Reddit are SPY, Apple, Tesla, Palantir, and AMD. Read More

Here is a summary of this week’s key economic releases:

Target Rate Probabilities for September 17th FOMC Meeting:

CME FedWatch

Fannie and Freddie IPO: The Trump administration is considering a $30 billion stock sale in Fannie Mae and Freddie Mac, valuing the companies at over $ 500 billion, with 5–15% of shares to be offered. Officials are debating whether to IPO jointly or separately. Both have been under federal control since 2008 and surged ~20% on the news. Uncertainty remains over conservatorship status. Read

Significant Inflows in US IG Bonds: Investors are buying US investment-grade debt at the fastest pace in nearly five years, with ETFs and mutual funds seeing $11.6B in inflows from July 30 to August 6 — the fifth highest weekly total on record and the most since late 2020, per EPFR and JPMorgan. Read

Executive Orders: An executive order issued Thursday aims to ease retirement investments in private equity, cryptocurrency, and private real estate. Another directs regulators to investigate whether banks discriminate based on political or religious grounds. Big banks have updated their policies to counter claims of bias against firearm manufacturers or oil and gas companies. Read

Apple Card Deal Near: JPMorgan Chase is in advanced talks to take over Apple’s credit-card program from Goldman Sachs. The card carries approximately $20 billion in balances, but high subprime exposure remains a challenge. Visa reportedly offered Apple $100M to replace Mastercard as the network. Read

GPT-5 Launched: OpenAI unveiled GPT-5 on Thursday, over two years after GPT-4, marking a key test of AI’s momentum amid heavy investment, hype, and concern. Rival Anthropic launched a new Claude model earlier this week, intensifying competition with Google and others. Microsoft will integrate GPT-5 into Copilot. Read

Apple Announces $100 Billion in US Investments: Apple will invest an additional $100 billion in its American Manufacturing Program to boost US production and avoid iPhone tariffs. Partners include Corning, Applied Materials, and Texas Instruments, with Corning expanding its workforce at the Kentucky plant by 50%. The total AMP commitment now stands at $600B, a move analysts say could ease White House concerns over India's reliance. Read

Palantir Beat: Palantir’s Q2 2025 results crushed estimates as AI demand drove a 48% YoY revenue jump to $1B, beating the $939M consensus. EPS came in at $0.16 adj. ($0.13 GAAP) vs. $0.14 ($0.08). U.S. commercial sales surged 93%, and government revenue rose 53%. Guidance topped forecasts, with FY revenue raised to $4.14–$4.15B and FCF seen at $1.8–$2B. Shares, already up 100%+ YTD, rose 5% post-market.

MUFG Mixed: MUFG posted a 2.2% rise in Q1 net profit, excluding a one-time item, as loan demand in Japan and abroad held firm despite market volatility. The results cap a strong quarter for all three megabanks, with MUFG on track for its record ¥2 trillion profit forecast set in May. Including the one-time item, profit fell 1.8% to ¥546B ($3.7B) from ¥555.9B a year earlier, supported by substantial corporate borrowing amid persistent inflation.

AMD Mixed: AMD reported Q2 FY2025 revenue of $7.68B, up 32% YoY and above the $7.43B estimate, with EPS of $0.48 matching consensus. Data center revenue was $3.24B, down 11.8% QoQ but up 14% YoY, compared to Q1’s 57% YoY jump. CEO Lisa Su cited record sales of servers and PCs, as well as strong demand for AI. Q3 revenue is projected at $8.4B–$9B, with a midpoint of $8.7B, compared to an estimated $ 8.37B.

Amgen Beat: Amgen reported Q2 earnings above estimates for the fourth straight quarter, with revenue up 9.4% to $9.18B vs. $8.91B consensus. Adjusted profit was $6.02 per share vs. $5.28 expected. Full-year revenue is forecast to be $35B–$36B, with 2025 EPS of $20.20–$21.30, including the impact of tariffs. Prolia sales decreased 4% to $1.1 billion, while Tavneos sales increased 55% to $ 110 million.

Arista Network Beat: Arista Networks reported adjusted operating income above $1B for the first time in a quarter and issued current quarter revenue guidance ahead of expectations. It posted earnings of 73 cents per share on $2.21B in revenue, up 30.2% Y/Y, beating estimates of 65 cents on $2.11B.

Caterpillar Mixed: Caterpillar’s Q2 adjusted EPS was $4.72, missing estimates of $4.80, with GAAP EPS at $4.62 vs. $5.48 a year earlier. Revenue rose above expectations to $16.57B but fell 1% YoY. Margins contracted as tariffs, higher manufacturing costs, and weaker pricing hit profits. The construction and Resource Industries saw sharp declines, while the energy and transportation sectors grew. Operating cash flow was $3.1B, with $1.5B returned to shareholders.

Eaton Beat: Eaton posted Q2 adjusted EPS of $2.95, beating estimates, with revenue up 11% to a record $7.0B on 8% organic growth and strong electrical and aerospace backlogs. Vehicle and eMobility sales fell 8% and 4%, with eMobility posting a $10M loss. Q3 EPS is projected at $3.01–$3.07, below estimates. Full-year EPS guidance of $11.97–$12.17 was reaffirmed, margins hit 23.9%, and free cash flow was $716M.

Disney Mixed: Disney beat earnings expectations with adjusted profit of $1.61 a share vs. $1.45 expected, raised its full-year forecast to $5.85, and upgraded guidance for streaming and parks. Revenue rose 2% to $23.65B, slightly below estimates. Entertainment operating income fell 15% to $1.02B, while the film studio posted a loss.

McDonald’s Beat: McDonald’s Q2 adjusted EPS was $3.19 on $6.8B revenue, beating estimates of $3.14 and $6.7B. Earnings rose 12% and revenue 5% YoY, reversing Q1’s 3% revenue drop. Global comparable sales grew 3.8%, led by international markets and a 2.5% U.S. gain, after a 3.6% U.S. decline in Q1.

Shopify Beat: Shopify’s Q2 revenue rose to $2.68B from $2.05B, beating forecasts. GMV jumped 42% on a constant-currency basis to $87.84B, driven by strong European growth. Merchant solutions revenue rose 37% to $2.02B; subscription revenue increased 17% to $656M. Net income surged to $906M (70¢/share) from $171M (13¢). Q3 guidance: revenue growth in the mid-to-high 20%, gross profit growth in the low 20%.

Applovin Beat: AppLovin reported Q2 2025 results above expectations, with adjusted EPS of $2.39 vs. $2.32 and GAAP EPS of $2.28 vs. $1.98. Revenue rose 77% YoY to $1.26B vs. $1.22B. Q3 revenue is projected at $1.32B–$1.34B, above the $1.31B estimate. The company also completed the $400M sale of its mobile gaming business to Tripledot Studios.

Frontinet Beat: Fortinet reported Q2 2025 EPS of $0.64, above estimates, on revenue of $1.63B, up 14% and in line with forecasts. Billings reached $1.78B, beating estimates, with a 33.1% adjusted operating margin. Q3 guidance calls for EPS of $0.62–$0.64 and revenue of $1.67B–$1.73B. Full-year revenue is projected to be $6.68B–$6.83B, with billings of $7.33B–$7.48B, exceeding estimates.

Airbnb Beat: Airbnb’s Q2 results beat estimates, with EPS at $1.03 (vs. $0.86 last year), adjusted EBITDA up 17% to $1.04B, margin at 34%, nights booked up 7% to 134.4M, and gross booking value up 11% to $23.5B. Q3 revenue is expected at $4.02B–$4.10B (+8–10%), with slower growth, over $2B in adjusted EBITDA, and lower margins from growth and policy investments. Cash stood at $11.4B with $1B in free cash flow.

Uber Beat: Uber posted Q2 revenue of $12.7B, up 18% on strong growth in bookings, trips, and MAPC. Profit rose to $0.63 per share, with adjusted EBITDA up 35% to $2.1B and margin improving to 4.5%. Free cash flow jumped 44% to $2.5B, hitting a $8.5B record on a trailing basis. Mobility bookings rose 16%, delivery 20%. Uber announced a $20B buyback and expects Q3 gross bookings up 17–21% and EBITDA growth of 30–36%.

Eli Lilly Beat: Eli Lilly raised its 2025 revenue outlook by $1.5B to $60B–$62B and lifted non-GAAP EPS guidance to $21.75–$23.00. Q2 revenue rose 38% YoY to $15.6B, led by $5.2B from Mounjaro (+68% YoY) and $3.4B from Zepbound (+172% YoY). Verzenio added $1.5B (+12% YoY). Adjusted gross margin improved to 85%, and non-GAAP EPS jumped 61% YoY to $6.31, beating estimates by $0.72.