Up 58% This Year, What’s Happening With Palantir Stock?

Palantir Technologies stock (NASDAQ: PLTR) has had a stellar 2025 thus far, rising by about 58% year-to-date. The recent gains come following the company’s solid Q4 2024 results, which saw revenue surge by about 36% year-over-year to $828 million, while also considerably exceeding management guidance of $767 million in revenue. Year-over-year growth rates picked up from 30% in Q3 and 20% in Q4 2023, indicating that the company’s AI tools are gaining momentum. Palantir’s commercial business which has lagged expectations in recent quarters, also did better, recording a 64% growth in its U.S. commercial revenue, compared to 45% growth in U.S. government sales. The company’s expects Q1 revenue of roughly $860 million, translating into 36% growth. Palantir has a track record of giving conservative guidance, so investors can potentially expect even stronger growth rates. As an aside, What’s driving Intel stock’s surge?

Trump, AI Have Been Big Levers Of Palantir Stock’s Appreciation

Now Palantir stock also remains up by about 7x since early 2024, driven by the frenzy surrounding artificial intelligence stocks and optimism about the results of the U.S. election. Investors were drawn to Palantir’s success with AI-driven tools and significant government contract wins over the last year.  There is also optimism surrounding the Donald Trump-led Republican administration, which is expected to increase federal spending on national security and immigration, driving demand for Palantir’s software tools. Palantir’s co-founder Peter Thiel, was an early Trump ally and he is also seen as holding a lot of influence within the current administration. Separately, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Image by Innova Labs from Pixabay

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The increase in PLTR stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were -23% in 2021, -65% in 2022, 167% in 2023, and 340% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could PLTR face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?

Despite several positive developments over the past year, Palantir’s valuation cannot be justified, in our view. The stock trades at about 210x consensus 2025 earnings and about 70x estimated sales. However, the company’s growth rates are pegged at just about 31% per consensus estimates. In comparison, cloud data warehousing and analytics player Snowflake trades at about 17x revenues with its growth rates also being just a notch below Palantir’s. In fact, AI bellwether Nvidia (NASDAQ:NVDA) stock trades at just about 31x estimated earnings for the next fiscal, even though revenues are on track to more than double this year,, with the consensus projecting over 51% growth for next year.

Moreover, Palantir’s heavy reliance on government sales, which can be pretty lumpy is a issue. While the company appears to be making progress with the commercial side of the business, it remains to be seen how it scan be scaled up. Palantir’s Foundry platform is designed for industries such as manufacturing, retail, and healthcare.  However, the larger contract sizes and costly, complex implementations might make it less accessible to small and mid-sized businesses. Additionally, the company faces competition from tech giants including Microsoft, who offer enterprise software, cloud solutions, and other tools, enabling them to easily cross sell their AI offerings to commercial customers.

[1] Returns as of 2/15/2025
[2] Cumulative total returns since the end of 2016