Palantir Technologies Inc. PLTR stock has tripled in a year. Shares have gained a whopping 313% year to date, significantly outperforming the broader technology service industry’s 57.4% return and the Zacks S&P 500 composite’s 27.4% growth.

PLTR stock’s consistent surge reflects optimism among investors eager to tap into the rapidly growing artificial intelligence (AI) market. The interest in AI stocks has been widespread, with significant gains seen across the sector. For instance, NVIDIA NVDA has gained 173%, International Business Machines IBM has climbed 42% and Oracle ORCL has gained 69% in the past six months.

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Let’s see if PLTR still offers a buying opportunity even after such a massive rally.

PLTR’s Expanding Customer Base and Shifting Revenue Dynamics

Palantir caters to businesses seeking tailored AI/ML services, particularly attracting large government and corporate clients willing to invest heavily in its systems. The company boasts a customer base comprising some of the world’s most prominent and influential organizations, reflecting the superiority of its technology. Furthermore, serving such high-caliber clients translates into premium-quality revenues for Palantir, suggesting a foundation for stable and predictable revenue growth in the years ahead.

Despite this, the company recognized the need to broaden its customer base. It adopted a modular sales approach, allowing clients to purchase specific product components instead of committing to the full platform upfront. This model also incorporates usage-based pricing, which lowers the entry barrier for new clients. By starting small, clients can gradually increase spending as they scale their usage of Palantir’s solutions. Consequently, the company has grown significantly in its U.S. commercial customer base.

We anticipate that as AI adoption expands within the private sector, the commercial segment will ultimately surpass the government segment in revenue.

PLTR’s AI Strategy Drives Growth Across Sectors

Palantir’s AI strategy is comprehensive, combining its proprietary Foundry and Gotham platforms with a solid plan to promote AI adoption across both government and commercial sectors. Its AI Platform (AIP) is the backbone of these capabilities, enabling organizations to process large datasets and derive real-time insights. This is especially valuable in sectors requiring extensive data integration, such as defense, healthcare, finance and intelligence, where operational efficiency and decision-making speed are critical.

In the government sector, Palantir is aligning its AI strategy with U.S. defense priorities. Its work on high-profile initiatives, such as the Department of Defense’s Open DAGIR project, underscores its role in modernizing military operations through AI-driven solutions. These initiatives enhance data interoperability and improve real-time decision-making capabilities, solidifying Palantir’s position as a key player in the defense sector.

In the commercial space, Palantir’s AIP boot camps — providing hands-on experience to over 1,000 companies — have proven instrumental in customer acquisition. These boot camps not only showcase the platform’s capabilities but also demonstrate its adaptability across industries like logistics, manufacturing and supply chain management.

In the third quarter of 2024, Palantir’s U.S. government revenues grew 40% year over year, driven by strong demand for its AI-powered products. U.S. commercial revenues also surged 54%, fueled by the success of AIP. Additionally, the company reported a 183% year-over-year increase in operating income and a 900-basis-point increase in adjusted operating margin, reflecting improved cost management and higher-margin government contracts.

PLTR’s Strong Balance Sheet

An analysis of the stock would be incomplete without highlighting management’s ability to efficiently accumulate profits, given Palantir’s strong financial standing. As of Sept. 30, the company held $4.6 billion in cash and had no debt, providing it with significant financial flexibility. This robust cash position allows Palantir to pursue new ventures or acquisitions without financial strain, strengthening its long-term growth potential.

S&P 500 Inclusion Enhances PLTR’s Market Visibility

Palantir was officially added to the S&P 500 on Sept. 23, following its consistent financial performance, including seven consecutive quarters of profitability. The inclusion is expected to boost demand for its shares, particularly from index funds and ETFs, while enhancing the company’s visibility and investor base.

Top and Bottom-Line Prospects Remain Robust

The Zacks Consensus Estimate for PLTR’s fourth-quarter 2024 earnings is pegged at 11 cents, indicating 37.5% growth from the year-ago level. Earnings in 2024 and 2025 are expected to increase 52% and 24.8%, respectively, from the prior-year actuals. The company’s sales are expected to gain 28% year over year in the fourth quarter of 2024. Sales are expected to rise 26.6% and 24.5% year over year, respectively, in 2024 and 2025.

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Upward estimate revisions reinforce this positive outlook. In the past 60 days, six estimates for fourth-quarter 2024 earnings have been revised upward, with no downward revisions, reflecting strong analyst confidence in the company. The Zacks Consensus Estimate for the quarter’s earnings has increased 10% during this period. For 2024 and 2025, eight and seven estimates moved north in the same time frame, with no southward revision for 2024 and one for 2025.

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Buy PLTR Stock for AI-Driven Growth and Long-Term Potential

The stock presents a compelling buy opportunity, given Palantir’s leadership in the AI sector, robust financial performance, strong cash position, and a positive earnings outlook. While it has already seen significant gains, the growing demand for AI solutions, continued government contracts, and inclusion in the S&P 500 suggest further upside potential. Investors looking to capitalize on AI-driven growth should consider adding Palantir to their portfolios.

PLTR currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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