2022 has been a disaster for Palantir Technologies(PLTR -2.48%) stock -- it's down 61% this year. However, the business kept chugging along. Despite solid revenue growth, Palantir is still unprofitable, which is a red flag for many investors in times of macroeconomic uncertainty.

With 2023 around the corner, could it be the year investors take notice of Palantir's stock? Or will it be shunned due to its unprofitable business? 

Palantir's software is powerful but also expensive

Palantir's artificial intelligence (AI) software is geared toward processing massive amounts of data and spitting out actionable insights. At first, it was developed for governments and was utilized to uncover Bernie Madoff's Ponzi scheme and allegedly helped find Osama bin Laden's hideout. While government customers remain a large part of Palantir's business, it has extended its offering to the private sector to pinpoint supply chain issues before they happen and help companies become more energy efficient.

The kicker of Palantir's software is its price tag: The subscription price of one unit of Palantir Foundry is $1 million per month. Let's say a company is willing to spend 1% of all its revenue on Palantir's software. That means a hypothetical company would need to bring in $1.2 billion in revenue annually for Palantir to make sense.

That eliminates a lot of potential customers, but the impact Palantir can have makes the software worth it. Through 20 projects, Tyson Foods saved around $200 million using Palantir in two years. Swiss Re, a reinsurance company, had Palantir's first nine-figure impact in a single project.

More businesses are starting to catch on as its commercial customer count has nearly doubled from 115 during last year's third quarter to 228 this year. If Palantir can keep up that level of customer growth, then 2023 could be a fantastic year for Palantir. However, with its high price tag, Palantir will have a challenge getting new customers on board. It will need to convince potential clients that the money they save will far outweigh the cost, but with a grim economic outlook, many management teams will be hesitant to purchase the software.

Despite that uphill battle, analysts project Palantir will grow sales by 22.1% next year. So with Palantir having an incredibly potent software package and growth likely not disappearing (although it won't be easy), 2023 shouldn't be a terrible year for Palantir.

However, there are a few things investors need to understand about Palantir's financials before rushing in to buy the stock.

Palantir is losing money, but it's closing the gap

As mentioned above, Palantir isn't profitable and had a $62.2 million operating loss in Q3 against $477.9 million in revenue -- a 13% loss margin. However, this metric is trending in the right direction, as Palantir's operating loss margin was 23% last year. Investors should continue watching this metric in 2023 and see if Palantir makes progress toward meeting its goal or if its sales and marketing expenses explode higher if it struggles to sell its software (sales and marketing expenses accounted for nearly all of Palantir's operating expense increase in Q3). 

Palantir also heavily compensates its employees with stock, paying out $140.3 million in stock this quarter. This is about 30% of revenue, so investors need to be wary of adjusted metrics, which remove this significant expense.

Unlike some tech companies, Palantir is also trading at a reasonable valuation now that it has declined from much higher levels earlier this year.

PLTR PS Ratio Chart

PLTR PS Ratio data by YCharts

A P/S ratio of 8.1 is about the same level that mature software companies like Adobe (9.2 times sales) and Autodesk (8.9 times sales) have traded around for the past decade, so investors don't need to worry about overpaying for Palantir's stock.

I'm not sure if 2023 will be the year when Palantir's stock takes off, but I know the stock is fairly valued with a great product offering. That gives the investment a solid base to stand on, and if Palantir continues working toward profitability, the investment is set up for success over the long term.

Palantir seems like a solid buy ahead of 2023, but investors need to stay patient with the stock if it doesn't immediately follow the business in a positive direction.