Palantir Technologies' (PLTR +5.26%) stock price rallied more than 152% over the past 12 months and easily beat the S&P 500's 11% gain. The data mining and analytics company dazzled the market with its accelerating revenue growth, soaring profits, and its exposure to the booming artificial intelligence (AI) market.
But at $154.85, Palantir's stock trades at 154 times next year's earnings and nearly 60 times next year's sales. Can it maintain those sky-high valuations over the next year?
Image source: Getty Images.
What does Palantir do?
Palantir, which was named after the all-seeing orbs from The Lord of the Rings, aggregates data from disparate sources (like emails, databases, spreadsheets, and sensors) to spot trends and predict future outcomes. It's also rolling out more tools to help its customers build their own custom AI applications.
Its Gotham platform collects data for government clients, while its Foundry platform serves big commercial customers. Most U.S. government agencies already use Gotham, and massive companies like Walmart, Amazon, and Apple use Foundry to analyze customer trends and optimize their supply chains.
Palantir got off to a strong start after it went public via a direct listing in September 2020. Its revenue surged 47% in 2020 and 41% in 2021, and it predicted its revenue would grow by at least 30% annually through 2025. But it abandoned that bullish outlook after its revenue only rose 24% in 2022 and 17% in 2023.
NASDAQ: PLTR
Key Data Points
That slowdown, which was largely caused by lumpy government spending and macro headwinds for its commercial business, caused the stock to sink from its debut price of $10 to a record low of $6 on Dec. 27, 2022. However, it turned profitable on a generally accepted accounting principles (GAAP) basis in 2023 as it streamlined its spending.
In 2024, Palantir's revenue rose 29% and its GAAP earnings per share (EPS) more than doubled. That acceleration was fueled by escalating military conflicts in Ukraine and the Middle East, which drove the U.S. government to sign new contracts with Palantir, and milder macro headwinds for its U.S. commercial business as interest rates declined. Its rising GAAP profit also led to its inclusion in the S&P 500 and Nasdaq 100 indexes.
What happened to Palantir over the past year?
Over the past year, Palantir's year-over-year revenue growth accelerated every quarter. That acceleration was driven by both its commercial and government businesses -- which accounted for 46% and 54% of its revenue, respectively, in the third quarter of 2025.
Moreover, its "Rule of 40" ratio (its revenue growth rate plus its adjusted operating margin) consistently expanded as its revenue growth accelerated. That rising ratio indicates its business model is sustainable, and economies of scale are kicking in.
|
Metric |
Q3 2024 |
Q4 2024 |
Q1 2025 |
Q2 2025 |
Q3 2025 |
|---|---|---|---|---|---|
|
Revenue growth (YOY) |
30% |
36% |
39% |
48% |
63% |
|
Commercial revenue growth (YOY) |
27% |
31% |
33% |
47% |
73% |
|
Government revenue growth (YOY) |
33% |
40% |
45% |
49% |
55% |
|
Rule of 40 ratio |
68% |
81% |
83% |
94% |
111% |
Data source: Palantir. YOY = Year-over-year.
For the full year, Palantir expects its revenue to rise 53% to 54% as its adjusted operating margin rises 10 percentage points to 49%. Analysts expect its GAAP EPS to more than triple. From 2024 to 2027, analysts expect its revenue and EPS to grow at a CAGR of 43% and 77%, respectively.
That explosive growth could be driven by the expansion of its U.S. commercial business, its new $10 billion contract with the U.S. Department of Defense, its plans to build a "Golden Dome" missile defense system for the U.S. with Anduril Industries and Microsoft, and its expansion into Europe and other overseas markets. It was also sitting on $6.4 billion in cash and equivalents with no debt at the end of the third quarter, so it still has plenty of room to ramp up its investments and acquisitions.
Where will Palantir's stock be in a year?
Palantir's business is firing on all cylinders, but too much growth is baked into its high-flying shares. It's still heavily dependent on government contracts, which can fluctuate every year and its commercial business could struggle to expand in countries with strict data privacy laws. Those unpredictable challenges could unexpectedly throttle its growth. Over the next 12 months, I believe Palantir's stock will stagnate or sink. It had a great run, but investors shouldn't pay the wrong price for the right stock.
