Palantir Technologies (PLTR 2.14%) stock continued its rapid ascent after the data analytics and artificial intelligence (AI) software company reported strong fourth-quarter results that once again showed accelerating revenue growth. The stock is up a whopping 510% over the past year, as of this writing.
Palantir has become one of the biggest AI winners on the software side, but with that has also come a frothy valuation. Let's dive into the company's latest results to determine whether it's too late to buy the stock.
NASDAQ: PLTR
Key Data Points
Crushing expectations
For the sixth consecutive quarter, Palantir's revenue growth accelerated, rising from 13% to 36% in that period. Fourth-quarter revenue reached $828 million, and adjusted earnings per share (EPS) rose from $0.08 to $0.14 year over year. That was well ahead of the $0.11 in EPS on $776 million in revenue that analysts were expecting, as compiled by LSEG.
Palantir's land-and-expand strategy is working as spending among existing customers continues to rise with trailing-12-month net dollar retention of 120%, a 200-basis-point improvement compared to last quarter. This metric measures revenue growth from customers that have been with the company for more than a year, and management noted the number doesn't reflect the strong growth it has been seeing from customers added within the past year.
By segment, commercial revenue climbed 31% year over year to $372 million, with U.S. commercial revenue soaring 64% to $214 million as its customer count reached 383. International commercial revenue was a laggard, rising 3% to $158 million.
On the government side of the business, revenue jumped 40% year over year to $455 million. U.S. and international government revenue climbed 45% and 26%, respectively. Palantir credited its strong U.S. government growth to good execution within existing programs and new awards as the government embraces its AI software.
Management is guiding for full-year 2025 revenue of $3.741 billion to $3.757 billion, representing growth of about 31% from 2024. The U.S. commercial business will fuel that outlook with at least 54% growth. Adjusted operating income is expected to land between $1.551 billion and $1.567 billion.
Image source: Getty Images.
Should investors still buy the stock?
Palantir is undoubtedly a leader in AI software, and it still faces a huge opportunity as it continues to both add new customers across industries while growing its relationships with existing ones. The company wants to become the go-to AI operating system for companies, and it's making progress toward that goal. Rising profitability also means Palantir is generating its growth in a disciplined manner.
However, valuation remains Palantir's biggest issue, and it trades at a forward price-to-sales (P/S) ratio of 63 as of this writing. I wouldn't be surprised if the company beats its outlook to grow revenue 40% in 2025. But can it repeat that performance over the next five years? It needs to in order to justify its valuation, and based on a theoretical $15.4 billion of revenue in 2029 and zero change to its market capitalization, the stock would still trade at a pricey 15 times revenue.
Sustaining that type of growth in a industry as competitive as AI will be no easy task. Investors must manage their risk if they're going to chase this stock, and I suggest keeping any position in Palantir small.
