Palantir Technologies (PLTR 1.65%) went public in September 2020, and shares of the software platforms and data analytics provider have jumped an impressive 714% since then as of this writing, though it is worth noting that almost all of the stock's gains have arrived in the past couple of years following the launch of its artificial intelligence (AI) software platform in April 2023.
However, Palantir stock has dropped considerably in the past month or so. The stock shot up remarkably when 2025 began, but it has dropped 38% from the 52-week high it hit on Feb. 18. Palantir's recent slide is because of factors outside of the company's control. The broader stock market negativity triggered by the tariff-induced global trade war has led investors to press the panic button.
NASDAQ: PLTR
Key Data Points
The tech-laden Nasdaq Composite index has dropped more than 20% in 2025 (as of this writing). Fears of an economic slowdown and a potential recession have led investors to book profits in stocks that delivered outstanding gains in the past couple of years, and Palantir is one of them.
However, the software specialist's sharp pullback of late could entice growth-oriented investors into buying the stock, considering the potential upside it could deliver over the next decade. Let's take a closer look at the catalysts that should act as tailwinds for Palantir over the next 10 years.
Booming demand for AI software can help Palantir zoom higher
Palantir's growth trajectory has started improving since the launch of its Artificial Intelligence Platform (AIP) a couple of years ago. The company launched AIP for both commercial and government customers with the aim of helping them build and deploy AI applications tailored to their operations. This platform has gained immense traction thanks to the productivity gains that AIP customers have been achieving, leading to outstanding growth in Palantir's customer base, as well as spending by existing customers.
Specifically, Palantir registered a 43% year-over-year increase in its customer count in the fourth quarter of 2024. Even better, it witnessed an increase in the number of customers signing bigger deals with the company. For example, the number of deals worth $1 million or more signed by Palantir last quarter increased by 25% from the year-ago period. Meanwhile, the increase in the number of $5 million-plus deals was bigger at 57% on a year-over-year basis.
These numbers make it clear that Palantir is winning big from the rapid adoption of AI software, a market that's expected to grow at an incredible pace over the next decade. Market research provider Roots Analysis expects the AI software market to generate a whopping $5.2 trillion in annual revenue in 2035, suggesting that Palantir is scratching the surface of a massive end-market opportunity that could help it sustain terrific growth levels over the next decade.
It is worth noting that Palantir has been ranked as the top vendor of AI software platforms by multiple third-party market research agencies such as IDC, Forrester, and others. This explains why customers have been flocking to Palantir's AIP, as the platform has been able to deliver cost and efficiency gains. The company reported a solid year-over-year increase of 56% in its total contract value in Q4 2024 to $1.8 billion.
This led to a big jump in Palantir's revenue pipeline. The company posted a 40% year-over-year increase in its remaining deal value (RDV) in Q4 to an impressive $5.4 billion. The metric refers to the total remaining value of contracts that Palantir has to fulfill at the end of a period. The growth in Palantir's RDV was higher than the 36% revenue growth the company clocked during the quarter.
So, Palantir is setting itself up for much stronger growth in the future. The company should benefit from the addition of more customers, as well as the increased spending by existing customers on its offerings. These factors are contributing toward positive unit economics for Palantir, allowing the company to record much faster growth in earnings as compared to revenue.
Unit economics is a measure of a company's profitability, helping us understand how much money it is making from each customer. Given that Palantir has been able to sign expanded deals with existing customers, a trend that could continue in the future thanks to the proliferation of AI, its margin profile could continue improving.
The following chart clearly indicates that Palantir's margins have improved considerably in the past couple of years, and there is still more room for growth on this front.
PLTR Operating Margin (TTM) data by YCharts
Should valuation be a concern right now?
Palantir's expensive valuation is a key reason why investors have been booking profits in this stock. After all, stocks trading at a premium valuation are at a higher risk during sell-offs since they are deemed riskier when compared to value stocks. The bad news is that Palantir is still trading at 66 times sales and 145 times forward earnings despite pulling back significantly of late.
So, it won't be surprising to see this AI stock pulling back further thanks to the negative sentiment that's affecting global stock markets right now. However, if Palantir stock continues to slide further and becomes available at a much cheaper valuation, it would be worth buying, considering the huge addressable opportunity available in the AI software market over the next 10 years.
What's worth noting is that Palantir has started growing at a faster pace than the rate at which the global AI software market is expected to grow over the next decade. Roots Analysis is forecasting a compound annual growth rate of almost 31% for the generative AI software market through 2035. Palantir's revenue growth of 36% was much faster than that, while the improvement in its RPO was even better.
There is a good chance that Palantir will be able to sustain healthy growth levels over the next decade in light of the productivity gains that AIP is delivering to customers. So, savvy investors would do well to keep an eye on Palantir stock and consider accumulating it if it falls further since it could turn out to be a solid investment over the next decade.
