Let's not mince words. Palantir Technologies (PLTR +1.69%) is among the most expensive stocks on the market. The stock is trading at a head-turning 226 times earnings and an equally shocking 83 times sales. That valuation has value investors running for cover, and even some growth investors are taking a hard pass.
While multiples of that magnitude may seem insurmountable, several metrics from Palantir's recent blockbuster financial report are worth considering, as they help to shed light on why investors are willing to pay up for Palantir Technologies stock.
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1. U.S. commercial revenue
Palantir originally developed its artificial intelligence (AI) and data mining tools with U.S. intelligence and law enforcement agencies in mind. By consolidating and analyzing data from multiple siloed systems, its algorithms were able to follow breadcrumb trails to help track down terrorists. Palantir has since adapted its tools to help enterprise companies make real-time, data-driven decisions.
The results speak for themselves. In the fourth quarter, Palantir's U.S. commercial revenue of $507 million soared 137% year over year and 28% quarter over quarter. This wasn't a one-off, either. This marked the seventh consecutive quarter of accelerating revenue growth. Moreover, it was also the second successive quarter of growth exceeding 100%.
Palantir's growth rate has been nothing short of astounding, which helps to explain its lofty valuation.
2. Remaining performance obligation (RPO)
While revenue sheds light on current sales, remaining performance obligation (RPO) helps to shed light on future revenue. Due to the nature of its business, Palantir often signs contracts and provides services spanning multiple quarters or even years. Accounting rules prohibit companies from recognizing revenue until they have performed the service. That's where RPO comes in. It calculates the revenue that is contractually obligated, but hasn't yet been recognized.
Palantir's fourth-quarter RPO of $4.21 billion soared 143% year over year. Put another way, investors already have insight into future sales, including $1.62 billion that will be recognized over the coming year. For context, the company's Q4 revenue amounted $1.4 billion, so it already has the equivalent of more than three months' worth of revenue booked for 2026 -- and Palantir has more sales coming in every day.
Not only is its current revenue soaring, but Palantir is setting a strong foundation for future growth.
3. Total contract value
One of the factors fueling Palantir's incredible growth spurt is the growing number of deals the company is signing. For example, in Q4, the company closed 180 deals worth at least $1 million. Of those, 84 were worth at least $5 million, and 61 were worth at least $10 million. Those numbers are impressive enough, but require context. In the prior-year quarter, Palantir closed 129 deals worth at least $1 million, 58 worth at least $5 million, and 32 worth at least $10 million.
So not only is management increasing the total number of deals, but it's also executing more high-value deals. This helped fuel Palantir's record-setting total contract value (TCV) of $4.26 billion, which surged 138% year over year.
NASDAQ: PLTR
Key Data Points
Is the stock a buy?
One of the biggest questions facing companies today is how to implement AI while still getting a reasonable return on their investment. Palantir's Artificial Intelligence Platform (AIP) is the answer to that problem. It integrates with existing business systems, providing keen insight and actionable intelligence that business leaders can use to solve everyday problems.
Furthermore, rather than just expecting companies to take them at their word, Palantir set up hands-on boot camps that pair executives and developers with Palantir engineers, allowing them to build AI-centric solutions side-by-side -- providing clear evidence of the system's worth.
As a result, Palantir is in a class by itself -- but it simply won't be the right fit for every investor. The stock's historic valuation and track record of volatility will keep many potential shareholders at arm's length.
However, for those with a cast-iron constitution, Palantir may turn out to be that rarest of investing opportunities -- a stock that can live up to its pricey valuation. Only time will tell. As a longtime shareholder, my money's on Palantir.
