Palantir Stock’s Growth Is Real, But So Are Valuation Concerns

Palantir (NASDAQ:PLTR) stock has surged nearly 5.5x over the past year and remains up 13% over the past month. As of Monday, the stock was trading close to $140 per share, giving the company a market cap of roughly $330 billion. is this surge warranted? There is good reason for some optimism. The company is winning more contracts under the Trump administration, and there also appears to be growing investor conviction that Palantir will benefit from rising geopolitical instability – including the wars between Russia and Ukraine, Iran and Israel, and mounting U.S.-China tensions. Palantir is also showing progress in its commercial business, long seen as a weak spot, with U.S. commercial revenue rising nearly 70% year-over-year during the last quarter. Yet despite the operational momentum, the stock’s valuation has entered territory that’s hard to defend, even by high-growth technology stock standards. Wall Street too remains unconvinced. Per FactSet, the average analyst price target is just about $107, around 23% below current levels.

Image by Bethany Drouin from Pixabay

Palantir’s Growth

While Palantir made a name for itself given its expertise in structured data analytics and defense-grade decision making software, it has since doubled down on generative AI, integrating large language models into its core platform, helping to widen adoption. The company’s fundamentals have been showing clear momentum. Palantir reported Q1 2025 revenue of $883.9 million, up 36% year-over-year and ahead of expectations. It raised full-year revenue guidance to a range of $3.89 to $3.90 billion, from a prior estimate of $3.74 to $3.76 billion. Profitability is improving too. Palantir Technologies’ Net Income  over the past four quarters stood at $462 million, implying a margin of 16.1%, while operating cash flow reached $1.2 billion – translating into a robust 40.3% OCF margin.

With $5.2 billion in cash and virtually no debt, the balance sheet is just as strong as the growth profile. Recent developments and contract wins have only added to the bullish narrative. In May, the Department of Defense awarded Palantir a $795 million contract to develop the Maven Smart System. The U.S. Army also swore in executives from Palantir – besides some other big tech firms – as lieutenant colonels, underscoring how central these companies have become to military modernization. A recent White House executive order mandating federal agency data integration has also benefited Palantir, as it was named a key software vendor. Palantir’s CEO Alex Karp’s public remarks referring to AI a “geopolitical arms race” on CNBC might indicate that the company is becoming even more important to the U.S. defense and intelligence apparatus.

Valuation Concerns 

All that being said, the real concern for Palantir stock is its valuation. Palantir trades at nearly 190x consensus 2026 earnings and about 66x revenues. This compares to 16x price to sales multiple for Snowflake and 25x for CrowdStrike, two companies which have slightly lower growth rates. Palantir’s high multiple implies it must sustain outsized growth and margin expansion for much longer to warrant its valuation. It’s possible that this may happen, but it’s a high bar.

The company’s high exposure to government contracts is also an issue. While that gives the company an edge in terms of stability and scale, it also introduces risk, as shifts in budget priorities or political power could significantly impact the top line. Sure, the company’s fundamentals are stronger than they were a year ago. But the question is whether they’re strong enough to justify a valuation that is pricing in near-flawless execution.

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