Palantir Technologies (PLTR 1.40%) has been one of the hottest artificial intelligence (AI) stocks in each of the past two years. After skyrocketing by 340% in 2024, the stock is up roughly 150% in 2025 with less than a week left in the year.
That type of performance is remarkable, but can the stock once again outperform in 2026?
NASDAQ: PLTR
Key Data Points
An AI orchestration leader
Palantir cut its teeth as a defense contractor for the U.S. government. After 9/11, some of the founders of PayPal believed that by using technologies similar to the fintech company's fraud-detection software, they could create a platform that could help intelligence agencies catch terrorists. Its first successful offering was Gotham, which could gather and analyze data from a wide array of sources, and help spot anomalies and detect potential threats.
The company later created its Foundry product for commercial clients, a platform designed to bring together previously siloed information from different parts of an organization and merge it into an ontology that linked data to the real-world objects it related to. While Foundry found some success, it didn't become a phenomenon until Palantir built its popular Artificial Intelligence Platform (AIP) on top of it to act as an orchestration layer. This clean data, together with the context of linking data to actual processes and physical assets, helps reduce AI hallucinations from third-party large language models (LLMs) and provides more actionable insights.
Meanwhile, Palantir also began using an unusual sales model that significantly shrank its sales cycles and sparked huge growth in its U.S. commercial customer base. Over a five-day "boot camp," Palantir would help potential customers build real AI-driven tools to show them how they could use AIP/Foundry to solve their actual problems.
In the wake of the introduction of AIP, Palantir's revenue growth has accelerated for nine straight quarters, led by the success of AIP in the U.S. commercial market. Last quarter, its total revenue soared 63% year over year to $1.18 billion, and U.S. commercial revenue skyrocketed 121% to $397 million. Growth is coming from both new customers coming to its platform and established customers expanding their usage.
In Q3, it grew its customer count by 45% year over year. It also recorded robust net revenue retention of 134%. Any number above 100% on that metric indicates growing average spending among customers who have been clients for over a year. However, that metric doesn't include the rapid growth in sales to customers who have been signed up for less than a year. That can be seen more in its U.S. commercial total contract value, which surged 342% in Q3.
Palantir has also been enjoying strong success in the government sector, as the federal government continues to embrace the use of AI. Last quarter, its U.S. government revenue climbed 52% to $486 million, while international government revenue jumped 66% to $147 million, a gain driven significantly by its work with the U.K.
Image source: Getty Images
Is the stock a buy?
While Palantir is one of the preeminent growth stocks in the market today, it trades at a hefty premium, with a forward price-to-sales multiple of more than 73 and a forward price-to-earnings ratio of 192. Those are extremely expensive multiples, even for a company growing as quickly as Palantir.
That said, the company does have one of the best opportunities in front of it of any AI business. The breadth of use cases for AIP is enormous, as it can help organizations across a wide array of industries solve mission-critical problems. Meanwhile, as the use of agentic AI expands, the company's opportunity should only grow, as it's aiming to become one of the main agentic AI orchestration layers. On top of that, unlike a semiconductor company like Nvidia, there is no question as to whether its business is cyclical in nature, as much of its revenue is recurring.
At its current valuation levels, I wouldn't recommend buying the stock, but if there is a big market pullback, it should be one of the first stocks you think about grabbing, as its long-term future is bright.
