Both Palantir Technologies Inc. (PLTR Quick QuotePLTR - Free Report) and Coherent Corp. (COHR Quick QuoteCOHR - Free Report) 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: Commercial AI Momentum, Strong Profitability

Palantir’s commercial business is emerging as its powerful future growth driver as enterprises accelerate artificial intelligence adoption. Commercial revenues are approaching half of total sales, supported by customers moving beyond pilot programs toward mission-critical deployments. The company’s Artificial Intelligence Platform is helping organizations connect models with proprietary data, workflows and operational decisions, strengthening its value across business functions. Larger contract sizes indicate deeper engagement and rising spending among existing clients. That suggests Palantir is building durable relationships rather than relying on customer acquisition. With U.S. operations generating more than four-fifths of revenues, exceptionally strong domestic demand should continue to support scale, recurring expansion and a widening competitive position in enterprise AI software.

Palantir’s exceptional margins and cash generation strengthen the bullish case by showing that rapid growth is translating into high-quality earnings. An adjusted gross margin in the mid-80% range in the second quarter of 2026 underscores the scalability of its software model, while an adjusted operating margin above 60% demonstrates significant operating leverage. Free cash flow also exceeded $1.2 billion in the quarter, highlighting the company’s ability to convert rising demand into substantial liquidity. Its $9.2 billion cash and short-term Treasury position provides flexibility to invest in product development, expand delivery capacity and pursue strategic opportunities without pressuring the balance sheet.

Although cloud-hosting responsibilities created modest gross-margin pressure, faster implementation and deeper customer relationships could outweigh that near-term effect. Overall, PLTR’s profitability profile supports sustained, self-funded expansion.

COHR: AI-Centric Portfolio, Strong Profitability

COHR’s business mix has shifted decisively toward artificial intelligence infrastructure and optical connectivity. Datacenter & Communications generated nearly 79% of fourth-quarter fiscal 2026 revenues, up from roughly 67% a year earlier, as segment sales surged 58.6% year over year to $1.6 billion. Demand for high-speed transceivers, optical circuit switching, co-packaged optics, multi-rail systems and PhotonLink solutions should support further expansion as datacenter operators upgrade network capacity. Demand visibility extending into calendar 2028 and long-term agreements running through the decade provide additional confidence.

However, this rapid transformation has increased COHR’s dependence on hyperscaler capital spending and timely customer deployments. Industrial revenues declined 15.8% year over year to $430.5 million, offering limited diversification against a datacenter slowdown. Therefore, while AI infrastructure represents a compelling multiyear opportunity, COHR’s performance is becoming increasingly sensitive to datacenter investment cycles, customer concentration and execution within its optical-connectivity operations.

COHR’s profitability trends indicate that its strong revenue growth is translating into better operating leverage. Fiscal fourth-quarter GAAP gross margin increased 277 basis points year over year to 38.5%, while adjusted gross margin expanded 215 basis points to 40.2%. Adjusted operating margin advanced 381 basis points to 21.8%, supported by higher manufacturing yields, lower input costs, pricing actions and a more favorable product mix. Adjusted operating income grew 62.1%, significantly faster than the 33.8% increase in revenues, demonstrating improved cost absorption and operating efficiency. The midpoint of first-quarter fiscal 2027 adjusted gross-margin guidance stands at 40.5%, suggesting that profitability can remain resilient as production scales.

Nevertheless, maintaining these gains will require continued yield improvements and disciplined capacity execution. A larger contribution from advanced optical products should strengthen margins, but manufacturing inefficiencies or unfavorable pricing could offset the benefits. Sustained margin expansion would confirm that COHR’s AI-led growth is creating durable economic value rather than merely increasing business volume.

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 about 83% and 115%, 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.

                                                              Image Source: Zacks Investment Research

In comparison, Coherent’s current-year sales are projected to grow about 50% year over year, a notable figure though more modest than Palantir’s top-line growth. EPS is expected to rise about 67% year over year. Like Palantir, EPS estimates for Coherent have also been trending higher over the past 60 days, reflecting growing confidence in its profitability, particularly amid the AI-fueled surge in demand for high-speed optical components and data center infrastructure.

                                                              Image Source: Zacks Investment Research

Coherent’s Valuation More Attractive Than Palantir

COHR is currently trading at a forward 12-month P/S ratio of 4.76X, which is below its 12-month median of 5.28X. In contrast, PLTR holds a much higher forward 12-month P/S ratio of 41.83X, though still below its median of 42.99X. Coherent appears far more attractively priced from a valuation standpoint.

Palantir is the Better Buy

Both Palantir and Coherent are well positioned to benefit from expanding artificial intelligence adoption, but Palantir appears better placed at present. Its accelerating commercial momentum, highly scalable software model, strong profitability and robust cash generation provide a compelling combination of growth and financial strength. Coherent offers attractive exposure to AI infrastructure and carries a more reasonable valuation, but its greater sensitivity to hyperscaler spending, manufacturing execution and datacenter investment cycles adds risk. Palantir’s stronger earnings growth outlook, improving analyst sentiment and higher Zacks Rank further reinforce its investment appeal, making PLTR the better buy of the two stocks currently.

While PLTR sports a Zacks Rank #1 (Strong Buy), COHR carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.