Palantir Technologies’ stock (PLTR -5.08%) has increased by 280% over the last 12 months. Despite the remarkable surge, it is about 30% behind its February 18 three-year high of $125.
On February 3, the business released an extraordinarily impressive fourth-quarter report, revealing that its revenues had increased 36% year over year to $828 million, much above the analysts’ average forecast of $775 million. Given that it was relative to a more extensive base and represented an acceleration of the 30% revenue growth rate announced in Q3, that top-line growth rate was outstanding.
Although the stock initially responded well to the earnings news, the enthusiasm appears to be waning. Alex Karp’s announcement that he intends to purchase $1.2 billion of the company’s shares has investors worried. The announcement last week that Defense Secretary Pete Hegseth had directed the military to create plans for significant budget cuts over the next five years has also hurt Palantir.
Impressive AI Strategy:
Palantir has based its business on a proprietary ontology system, which emphasizes the successful application of AI across industry use cases more than many other artificial intelligence (AI) competitors that have concentrated on creating sophisticated foundation models.
Ontologies produce digital frameworks that arrange and specify the relationships between an organization’s digital and physical resources. As a result, Palantir can generate “digital twins” of its client’s operations, linking and integrating their disparate data assets and elucidating their dynamic linkages. Building a strong ontology system may take decades of effort and money, so what Palantir provides its customers is difficult to duplicate. For Palantir, this has grown to be a significant competitive advantage.
Another significant trigger was the Palantir Artificial Intelligence Platform (AIP). Clients can quickly implement AI tools for real-world use cases in a safe, visible, and well-regulated manner thanks to AIP’s ability to effortlessly incorporate generative AI into their operations.
AIP “boot camps,” which begin with a genuine and urgent business problem for the prospective customer and demonstrate how Palantir’s technologies can be used to solve it, are the focal point of Palantir’s most recent go-to-market approach. Sales conversion rates have increased as a result.
AIP is one of the main factors driving Palantir’s commercial business development in the US. By the end of 2024, the firm had 382 commercial clients in the United States, about five times as many as it had three years prior (before the introduction of AIP). In the fourth quarter, its U.S. commercial division revenues increased 20% sequentially and 64% year over year. Additionally, the division had its best quarter in terms of overall contract value, coming in at $803 million, up 170% sequentially and 134% year over year.
Lastly, Palantir’s U.S. government business is still doing well; in the fourth quarter, it grew 7% sequentially and 45% yearly. It is indisputable that Palantir stock is trading at an unsustainable valuation level, notwithstanding the company’s considerable advantages. Despite its recent decline, its share price still trades at around 196 times the anticipated profits. Palantir’s stock has risen 19% in 2025, a substantial decline from gains of more than 40% only one week ago. A better sense of what could occur next can be obtained by looking at the company’s past performance. Palantir has a history of extreme volatility. A substantial decline has followed every significant peak in the share price.
This time, Palantir’s stock is moving along the same path. However, given the strength of its AI programs and its quickly growing commercial and government operations, it is indisputable that the company’s foundations are better now. The business is also profitable, with a 2024 adjusted free cash flow of $1.25 billion and a GAAP net income of $462 million. The sharp decline in the share price in only one week doesn’t seem very reasonable.
Given this, long-term investors with a high-risk tolerance should consider purchasing a modest share in Palantir while prudence is still advised. Investors who decide to include it in their portfolios should consider employing a dollar-cost averaging technique because the share price bottom is still unclear. This would lower their total risk while exposing them to Palantir’s upside potential.
