As of this writing, shares of data analytics specialist Palantir Technologies (PLTR +1.25%) have risen by 150% this year. This makes it the eighth-best and third-highest performing stock in the S&P 500 and Nasdaq-100, respectively, in 2025.
Let's break down Palantir's epic performance this year and assess if the artificial intelligence (AI) darling can keep up the momentum heading into 2026.
Image source: Getty Images.
2025 was a historic year for Palantir
Palantir offers a suite of AI-powered software tools, including Foundry, Gotham, and Apollo. These platforms specialize in aggregating workflows across disparate systems to help large enterprises make sense of messy data.
PLTR Revenue (TTM) data by YCharts; TTM = trailing 12 months.
If the financial profile above serves as any indication, it seems appropriate to say that demand for Palantir's Artificial Intelligence Platform (AIP) is exceptionally strong. In 2025, the company won a number of historic deals and formed some interesting strategic partnerships as well:
- It was awarded a contract worth up to $448 million with the U.S. Navy, which will use Foundry and AIP to enhance its shipbuilding operations and supply chain protocols.
- Over the summer, Palantir closed a deal with the U.S. Army worth up to $10 billion over the next decade.
- The company recently formed a partnership with Nvidia, which tightly integrates Palantir's data mining expertise with the chip designer's strengths in graphics processing units (GPUs) and CUDA software architecture. This effectively creates a full-stack operating system for accelerated computing.
Through the first nine months of 2025, Palantir's commercial and government businesses have each grown by roughly 50%. This is particularly impressive considering the company heavily relied on public sector deals for much of its history prior to the AI revolution.
Palantir's valuation is abnormally high. History is clear about what happens next
Palantir has proved that it can compete at a high level in the world of enterprise software -- a market that was once dominated by the likes of Salesforce and SAP. When it comes to new disrupters making headway against industry incumbents, Palantir stands out against the competition.
PLTR PS Ratio data by YCharts.
Palantir's price-to-sales (P/S) ratio of 117 is more than triple the next closest peer among the software-as-a-service (SaaS) businesses listed above. Sometimes, trading at a premium can be warranted given a company's performance and outlook. But in the case of Palantir, I think its valuation has become overextended.
Prior to the dot-com bubble bursting, early internet pioneers like Cisco, Microsoft, and Amazon peaked at P/S levels between 30 and 50. As history shows us, even the biggest contributors to the internet were not able to sustain their frothy valuations after the bubble burst.
Should you buy Palantir before 2026?
In my eyes, this is a tough stock to gauge. On one hand, I think the company has become a formidable leader at the intersection of software and AI. Against this backdrop, I am bullish on its long-term prospects.
On the other hand, Palantir's valuation seems unjustifiably high. While history does not repeat every detail exactly, it appears highly likely that the stock will experience a correction one way or another. Shares could sell off during a broader macroeconomic correction in the AI market, or investor expectations could become misaligned with the company's underlying performance, leading to a stock price decline.
In my eyes, Palantir Technologies has largely become a momentum stock with outsize unpredictability. While I think the company is in good hands for the long haul, the stock looks overbought right now. For these reasons, I would continue monitoring the company's performance relative to its valuation but look for more appropriate and reasonable entry points in 2026.
