Palantir (NASDAQ:PLTR) stock has increased nearly 5.5 times in the past year and is up 13% in the last month. As of Monday, the stock was trading at approximately $140 per share, resulting in a market capitalization of about $330 billion. Is this rise justified? There is substantial reason for optimism. The company is securing more contracts under the Trump administration, and there seems to be rising investor confidence that Palantir will gain from increasing geopolitical instability – which includes the conflicts between Russia and Ukraine, Iran and Israel, along with escalating U.S.-China tensions. Additionally, Palantir is making advancements in its commercial sector, which has historically been viewed as a weak link, with U.S. commercial revenue climbing nearly 70% year-over-year during the last quarter. Yet, in spite of this operational progress, the stock’s valuation has reached levels that are difficult to justify, even by the standards of high-growth tech stocks. Wall Street also remains skeptical. According to FactSet, the average target price from analysts is roughly $107, about 23% lower than current levels.
Palantir’s Growth
Although Palantir gained recognition due to its skills in structured data analytics and defense-grade decision-making software, it has since intensified its focus on generative AI, incorporating large language models into its primary platform, facilitating broader adoption. The company’s fundamentals are demonstrating clear upward momentum. Palantir disclosed Q1 2025 revenue of $883.9 million, which represents a 36% growth year-over-year and surpasses expectations. It raised its full-year revenue guidance to a range of $3.89 to $3.90 billion, a revision from an earlier estimate of $3.74 to $3.76 billion. Profitability is also on the rise. Palantir Technologies’ Net Income over the previous four quarters was $462 million, indicating a margin of 16.1%, while operating cash flow totaled $1.2 billion – leading to a solid 40.3% OCF margin.
With $5.2 billion in cash and almost no debt, the financial position is as robust as the growth outlook. Recent events and contract wins have further strengthened the positive narrative. In May, the Department of Defense granted Palantir a $795 million contract to develop the Maven Smart System. The U.S. Army also commissioned executives from Palantir – along with representatives from other major tech firms – as lieutenant colonels, highlighting how integral these companies have become to military modernization. A recent executive order from the White House requiring federal agency data integration has also been advantageous for Palantir, as it was designated a key software vendor. CEO Alex Karp’s public statements on CNBC referring to AI as a “geopolitical arms race” may suggest that the company is becoming increasingly pivotal to the U.S. defense and intelligence infrastructure.
Valuation Concerns
That being said, the primary concern regarding Palantir stock is its valuation. Palantir is trading at nearly 190 times the consensus 2026 earnings and around 66 times its revenues. In comparison, Snowflake has a price-to-sales multiple of 16 times and CrowdStrike has a multiple of 25 times, both of which have slightly lower growth rates. Palantir’s high valuation suggests it must maintain exceptional growth and margin expansion for an extended period to support the current valuation. While this may be plausible, it presents a significant challenge.
Additionally, the company’s substantial dependence on government contracts poses a risk. While this dependence provides an advantage in terms of stability and scale, it also carries the risk that changes in budget priorities or political dynamics could greatly affect revenues. Although the company’s fundamentals are indeed stronger than they were a year prior, the critical question remains whether they are robust enough to validate a valuation that anticipates near-perfect execution.
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