Palantir (PLTR +1.25%), a developer of data mining and analytics services, went public through a direct listing on Sept. 30, 2020. Its stock opened at $10 per share, and now trades at about $178. That 1,680% rally outperformed the S&P 500's 107% gain during the same period.
Can Palantir continue to crush the market in 2026? Let's review its business model, growth rates, and valuations to see where this hot growth stock might be headed.
Image source: Getty Images.
What does Palantir do?
Palantir offers two data mining platforms: Gotham, designed for its government clients, and Foundry, tailored for its commercial clients. Both platforms gather data from diverse sources to help their clients identify trends, make informed predictions, and execute smarter, data-driven decisions.
Before Palantir went public, most U.S. government agencies were already using Gotham to plan their missions and projects. The military reportedly used Gotham to track down Osama Bin Laden in 2011, the FBI used the platform to cross-reference its data, and ICE used it to locate undocumented immigrants. In its S-1 filing, it declared it would become the "default operating system for data across the U.S. government." Since its market debut, the U.S. and its allies have reportedly used Gotham to plan missions in Ukraine, Israel, and Venezuela.
Palantir leveraged its battle-hardened reputation to sell Foundry to big commercial customers, including Walmart, Amazon, and Apple. These companies all use Foundry to analyze customer trends and optimize their supply chains.
NASDAQ: PLTR
Key Data Points
How fast is Palantir growing?
Palantir's revenue soared 47% in 2020 and another 41% in 2021, but only rose 24% in 2022 and 17% in 2023. It attributed that slowdown, which shattered its original forecast for growing its revenue by at least 30% annually through 2025, to the uneven timing of its government contracts and macroeconomic headwinds for its commercial business.
On the bright side, Palantir turned profitable on a generally accepted accounting principles (GAAP) basis in 2023 as it reined in its spending and reduced its stock-based compensation expenses. Those stable profits paved the way for its inclusion in the S&P 500 in 2024.
In 2024, Palantir's revenue rose 29% as its GAAP earnings per share (EPS) more than doubled. Two catalysts sparked that acceleration: escalating military conflicts in Ukraine and the Middle East, which drove the U.S. government to sign new contracts with the company; and the accelerating growth of its U.S. commercial business as interest rates declined.
Over the past year, Palantir's revenue growth accelerated across its commercial and government businesses. Its "Rule of 40" ratio (the sum of its revenue growth rate and adjusted operating margin) remained far above 40% and jumped to the triple digits in its latest quarter, indicating it has plenty of pricing power as economies of scale take effect.
|
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.
Palantir expect its full-year revenue to rise 53%-54% in 2025 as its adjusted operating margin expands ten percentage points to 49%. Analysts expect its GAAP EPS to more than triple.
Can that breakneck growth support its sky-high valuation?
From 2024 to 2027, analysts expect Palantir's revenue and GAAP EPS to grow at a CAGR of 45% and 84%, respectively. The expansion of its U.S. commercial business, its new $10 billion contract with the U.S. Department of Defense, its push into Europe and other overseas markets, new AI tools, and its plans to build a "Golden Dome" domestic missile defense system with Anduril Industries and Microsoft (MSFT 0.73%) could all fuel that explosive growth.
However, a significant portion of that future growth is already reflected in its current stock price. At $177 per share with a market capitalization of $421.5 billion, Palantir trades at 217 times and 67 times its projected earnings and revenue for 2026, respectively.
The bears will argue that it's a meme stock at these levels, and that it could be cut in half during the next market downturn and still be considered expensive relative to its industry peers. The bulls will claim it's still a solid hypergrowth stock that has plenty of irons in the fire.
I wouldn't load up on Palantir at these bubbly levels, since the S&P 500 is already trading at a historically expensive 31 times earnings. However, I'd consider accumulating some shares when the market pulls back -- since I wouldn't want to pay the wrong price for the right company.
