Shares of Palantir Technologies (PLTR 1.87%) have been one of the best-performing artificial intelligence (AI) stocks over the past few years. Another blowout earnings report sent the stock surging in early February. The stock rocketed 340% in 2024 and is already up 46% year to date in 2025.
When you're providing a product that delivers tangible savings to organizations, you're going to be growing like there's no tomorrow. Palantir's revenue accelerated to 36% year over year in Q4 and 14% over the previous quarter.
Let's look at why the company's momentum is for real and whether investors should pull the trigger at these highs.
NASDAQ: PLTR
Key Data Points
Palantir has a big opportunity ahead
Palantir continues to see balanced growth for its software across government agencies and U.S. corporations. But the latter is where the action is right now and why investors are so bullish on the company's prospects. U.S. commercial revenue grew 64% over the year-ago quarter, outpacing the 45% increase in U.S. government revenue. Overall, Palantir closed 129 deals worth over $1 million each, up from the 104 deals it signed in Q3.
This is the result of companies achieving real savings by using Palantir's AI. For example, Palantir is working with an automotive supplier to automate manual checks performed by its human engineers. Those manual checks would otherwise take up to 100 hours to complete.
This is why some Wall Street firms are projecting that AI will add trillions of dollars' worth of value to the economy. The productivity gains from AI could be significant, and Palantir is clearly going to be one of the leading providers of enterprise software that helps organizations realize these benefits.
One executive on the company's Q4 earnings call mentioned they feel energy on the ground talking to customers and the impact they are seeing from using the product. This bodes well for another year of strong growth.
Why investors should wait for a better price
Palantir is clearly in the pole position in the AI software market. But this doesn't necessarily mean investors should run out to buy the stock.
Palantir's shares look frothy. Its market cap (share price times total shares outstanding) has shot up to $252 billion at the time of writing, which is steep compared to the company's $2.86 billion in trailing-12-month revenue. Palantir could double its revenue in 2025, representing a significant acceleration over its current growth rate, but the stock would still trade at an expensive price-to-sales multiple of 45.
Even using the company's free cash flow, the shares are trading at a high multiple of 238. That's pricing in a lot of growth even though the company is already converting a high percentage of its revenue into cash flow.
Stocks can outperform business fundamentals for a short while but not consistently over the long term. Palantir shares are fetching incredibly high multiples of revenue, free cash flow, and earnings that will be difficult to justify.
Keep in mind that Palantir grew revenue at an even higher rate (41%) in 2021 before the stock fell 64% in the market correction in 2022. The stock is priced for perfection and then some, raising the risk of another sell-off. I would avoid chasing the stock now and wait for a dip before starting a position.
