Is there a more compelling -- or polarizing -- stock on U.S. indexes right now than Palantir Technologies (PLTR +3.40%)? On the one hand, the company is showing ridiculous growth, sending shares up 85% so far in 2025 and 440% over the past 12 months.
But the company, which is evolving from a government contractor to a powerhouse that uses artificial intelligence to help both government and commercial clients make real-time decisions, has a stock valuation that would make even the most stout-hearted investor wince. And there's emerging concern that some of Palantir's newest deals with the U.S. government are walking (or blurring) a line separating government needs and personal privacy.
Analysts are all over the map when forecasting Palantir's future, but most of those tracked by Yahoo! Finance rate the stock a hold, and the group has an average price target of $101 as I write this, while the stock trades at about $140 per share. But I think Palantir is going to continue to outperform -- and confound -- Wall Street at least through 2026.
Long-term investors should buckle in for the ride.
NASDAQ: PLTR
Key Data Points
Palantir's growth story is one of legend -- and is just getting started
Palantir delivered its first-quarter 2025 earnings report in early May. Revenue grew 39% year over year, with U.S. commercial sales up 71% and U.S. government sales up 45%. That's along with a 39% increase in total customer count year over year, and an 8% quarter-to-quarter gain.
The company is landing huge deals, too, including 139 deals in Q1 worth more than $1 million, 51 deals worth more than $5 million, and 31 deals worth more than $10 million. The stock's market capitalization, which was just $56.4 billion a year ago, is now $331 billion.
While Palantir is best known for its military and intelligence use cases (the company first rose to public prominence in its role helping the government find and kill Osama bin Laden), it's got its fingers in plenty of other pies, including healthcare, factory modernization, and helping financial institutions make real-time, AI-powered decisions.
Palantir recently announced partnerships with Italian paper manufacturer Fedrigoni, healthcare organization The Joint Commission, Elon Musk's xAI, and investment firm TWG Global, as well as six industrial firms. All of this shows Palantir's commercial business is just getting started.
Analysts are misjudging the stock
Any conversation about Palantir's valuation has to start with those gaudy price-to-earnings numbers. The forward P/E based on estimated earnings is 256, and the trailing P/E is an outrageous 600.
Wall Street's consensus price target for PLTR is $101, with a high of $155. One analyst has a price target of $40. That reflects how wildly divided analysts are on what Palantir's true value is.
But if you can't stop thinking about the P/E, keep this in mind: Amazon (AMZN +0.61%) had a P/E in 2013 of over 1,000 with a market cap of only $120 billion. It was primarily known as an e-commerce company as its Amazon Web Services was only 7 years old. But AWS has since helped Amazon revolutionize cloud computing, allowing companies to rent computing power instead of investing in expensive data centers. It created a new revenue stream for Amazon and forever changed the company's business model. Today, AWS provides billions in annual revenue and provides Amazon a key role in the future of technology. That's a major reason why Amazon's market cap exploded to reach more than $2 trillion today -- the market finally recognized its true value.
So, sometimes great companies trade at incredible valuations before the world understands their real potential. And I think that's where we are with Palantir.
We live in a truly messy world
As the world gets more complicated -- war in Ukraine and the Middle East, tensions between Washington and Beijing, and the massive changes happening in the U.S. government -- Palantir's government contracts are just going to grow. The demand for AI-driven intelligence tools is rising.
Not everyone is comfortable with that. There are published reports that Palantir is expanding its role with the Pentagon, the Department of Homeland Security, and the Department of Health and Human Services. And it's also reportedly talking to the Internal Revenue Service and the Social Security Administration.
The fear is that the government will be able to use Palantir's Foundry platform to create a massive government database that keeps track of data like individual bank account numbers, debt, citizenship or immigration status, and medical information.
I'm not going to make a value judgment about Palantir, although it's important to acknowledge the elephant in the room. From an investment perspective, though, I'm taking notice about what these developments say about the power and reach of Palantir's software. Palantir helps its customers anticipate threats, track assets, manage resources, and make split-second decisions. The more unpredictable the world becomes, the more essential Palantir's technology becomes, and this will make it more appealing to investors.
Image source: Getty Images.
Palantir is worth the risk
There's no easy call to make on Palantir stock. On the one hand, revenue and profits are growing, and the software is both unique and necessary. But on the other hand, Palantir's valuation is absurd and the privacy debate won't go away soon. It's no wonder that analysts are all over the place.
Here's where I land: Palantir is a future-defining force in AI, doing amazing work not only with the military and the government but also in industries that people use every day.
The company beat expectations in 2024 and it's killing it in 2025. I see that continuing throughout the rest of the year and into 2026, even if Wall Street's not on board. Palantir will prove its skeptics wrong.
