Palantir Technologies Reports Strong Growth Amid Valuation Concerns

Palantir Technologies Inc. (NYSE: PLTR) has experienced significant stock market gains over the past year. As of May 24, 2025, PLTR shares closed at $123.31, marking a 63% increase for the year and over a 400% rise in twelve months. In the last month alone, the stock surged more than 40%, driven by demand for its AI-powered platforms in both government and commercial sectors. The company reported a 36% year-over-year revenue increase in Q4 2024, totaling $828 million, and forecasted full-year 2025 revenues between $3.74 billion and $3.76 billion. However, concerns about valuation remain prevalent.

Palantir’s performance stands out compared to its peers. Tyler Technologies has seen a modest 12% year-to-date gain and 20% rise over the past year. Verint Systems has experienced a 15% decline year-to-date and a 25% decrease in the last year. Datadog achieved a 28% YTD gain and a 45% increase over twelve months, while Alteryx’s stock fell by 40% YTD and over 60% in one year. In contrast, Palantir’s rapid rise points to strong market optimism regarding its AI capabilities, although questions about its sustainability persist.

Valuation: A Stretched Multiple

Palantir’s valuation poses a significant concern. With a price-to-sales (P/S) ratio of 101.5—far exceeding the S&P 500’s average of 2.8—the stock is trading at a premium that few companies can maintain in the long run. Consequently, investors are paying over 100 times current revenues, which requires not only growth but also near-perfect execution moving forward.

Growth: Rapid and Robust

The company’s growth trajectory is strong, averaging a 23% annual revenue increase over the past three years. Revenues rose by 28.8% in the last year, from $2.2 billion to $2.9 billion. The most recent quarterly results showed a 36% year-over-year increase, reflecting both expanding commercial sector penetration and ongoing strength in government contracts.

Profitability: Mixed but Improving

Profitability metrics show a solid operational base, albeit with room for improvement. For the past four quarters, Palantir reported an operating income of $310 million with a 10.8% margin. The company generated $1.2 billion in operating cash flow, resulting in a 40.3% cash flow margin, along with a net income of $462 million, reflecting a 16.1% margin.

Financial Stability: Rock-Solid

Palantir possesses a strong balance sheet, holding only $239 million in debt against a market cap of $273 billion. The company boasts a debt-to-equity ratio of just 0.1% and $5.2 billion in cash and equivalents, representing 82.5% of its total $6.3 billion in assets. This liquidity provides a cushion against market volatility and allows significant strategic flexibility.

Downturn Resilience: A Cause for Concern

Despite its strengths, Palantir has historically struggled during economic downturns. In the 2022 inflation shock, the stock dropped 84.6%, while the S&P 500 fell just 25.4%. During the COVID-19 pandemic, Palantir fell 53.9%, compared to a 33.9% decline in the broader index. Although the stock has rebounded, surpassing previous highs and reaching $130.18 in May 2025, its past performance indicates vulnerability to economic shocks.

Strong Fundamentals, Expensive Entry Point

While Palantir demonstrates strong execution and leadership in AI-driven analytics, its high valuation metrics raise concerns. Momentum investors may continue capitalizing on its growth, but value-oriented investors might consider PLTR relatively expensive based on current metrics. Potential investors should balance the company’s considerable potential against the risks associated with its elevated stock price.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.