Palantir Technologies (PLTR 3.05%) is one of the leading players in the artificial intelligence (AI) software platforms market, a niche that has been growing at an incredible pace recently thanks to the productivity gains that AI is bringing to organizations across the globe.
Various third-party estimates suggest that Palantir's AI and machine learning software platform is better than that of rivals. Palantir's customer base has been swelling nicely in recent quarters while existing customers have been expanding their contracts to buy more of its services. Palantir's improving growth profile has led to a 390% spike in its stock price in the past year.
As a result, it is now trading at an expensive valuation, which many believe could limit more upside. But will Palantir's valuation be enough to halt this juggernaut? Or will the AI stock be able to sustain its strong growth levels over the next decade and deliver more gains to investors? Let's find out.
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Palantir is definitely expensive, but that's half the story
With a price-to-earnings (P/E) ratio of 607 and a sales multiple of 134, there is no denying that Palantir looks extremely expensive. Consequentially, only 24% of the 29 analysts covering Palantir rate it as a buy, and the 12-month median price target of $167 points toward a potential drop of 8% from current levels.
NASDAQ: PLTR
Key Data Points
However, investors looking to buy Palantir would do well to focus on the next decade as it could become a much larger company than it is now. It has generated just $3.44 billion in trailing-12-month revenue. That's just a tiny piece of the $153 billion in revenue that the AI software platforms market is expected to generate in 2028, clocking an annual growth rate of close to 41%.
IDC estimates that this market was worth an estimated $28 billion in 2023. Palantir generated $2.2 billion in revenue that year, which also coincided with the launch of its Artificial Intelligence Platform (AIP) for both government and commercial applications. Palantir was already involved in providing AI-powered tools to intelligence organizations and governments before it started commercializing this technology.
Palantir has, in a sense, been selling AI software tools for quite a while. And based on IDC's estimate of the AI software platforms market in 2023, Palantir likely controls around 8% of this lucrative space, a percentage that's on the rise.
Palantir's revenue pipeline is becoming more robust
This is evident from the massive spike of 140% in the total value of contracts Palantir booked in the second quarter of 2025. It landed new contracts worth $2.3 billion during the quarter. That led to a 65% year-over-year increase in Palantir's remaining deal value -- which is the total value of unfulfilled contracts -- to $7.1 billion last quarter.
This suggests Palantir's future revenue pipeline is increasing at a faster pace than its top line. As a result, there is a good chance that the company's growth rate will accelerate further going forward. Moreover, the company is enjoying solid unit economics, and that's likely to translate into stronger earnings growth over the next decade.
Unit economics refers to a company's profitability on a per-unit basis. It can be the money that a company is making from a product, a customer, or a subscriber. A company's aim is to achieve positive unit economics, which happens when it makes more money from a customer than it has to spend on acquiring one.
The good news is that Palantir has already achieved positive unit economics. Its earnings in the second quarter of 2025 increased by 78% from the year-ago period to $0.16 per share, far exceeding the 48% growth in its revenue. The phenomenal bottom-line growth can be attributed to an increase in spending by Palantir's existing customers, which are giving it bigger contracts based on the productivity and efficiency gains that the company's AIP is delivering.
As such, Palantir's earnings could grow at a remarkable pace over the next decade, and that could set the stock up for more upside.
Here's the gains this AI stock could deliver in the next 10 years
We have already seen that Palantir is growing at a faster pace than the AI software platforms market.
As already mentioned, this space is expected to generate $153 billion in revenue in 2028, growing at an annual rate of 41%. Assuming that this market's annual growth rate drops to 20% from 2029 to 2035, it could still open a massive revenue opportunity worth $548 billion. It remains to be seen how much of this end-market opportunity Palantir can corner.
But if it continues to grow at a faster pace than the end market, its positive unit economics could ensure outstanding earnings growth over the next decade. For instance, even if Palantir's top line increases at an annual rate of 30% over the next 10 years and its earnings reach an annual growth rate of 40%, its bottom line could jump to $8.96 per share (using its projected 2025 earnings of $0.64 per share as the base).
If Palantir is trading at a significantly discounted 50 times earnings after 10 years (in line with the U.S. technology sector's average earnings multiple), its stock price could hit $448. That would be a 146% jump from current levels. However, Palantir could potentially grow at a rate that exceeds my projections above. So don't be surprised to see this high-flying stock delivering even bigger gains in the next decade.
