Can Palantir Technologies Live Up to Its Sky-High AI Stock Hype?

Is Palantir Technologies a Once-in-a-Generation AI Stock?

Key Points
Palantir has built a strong business with government and commercial ties. Growth will need to accelerate to justify the stock price.

Palantir Technologies (NASDAQ: PLTR) has been one of the most talked-about AI stocks over the past year and a half. Since the start of 2024, its stock price has surged over 700%, with more than an 80% rise in 2025 alone. These returns are impressive in such a short time, but many investors still believe Palantir has room to grow. If it does, Palantir could be considered a once-in-a-generation stock in the AI space. The question is whether Palantir truly fits that profile or if the stock price reflects other factors.

Palantir's Business Growth and Structure

Palantir operates through two main segments: Government and Commercial. The company initially focused on software for government use, where it found significant success. Over time, Palantir developed commercial applications, expanding its reach beyond the public sector.

The core of Palantir’s offering lies in data analytics powered by AI, delivering actionable insights to users. This approach has affected how some organizations operate by transforming data into meaningful decisions.

Financially, Palantir has shown strong growth. In Q1, U.S. commercial revenue climbed 71% year over year to $255 million, and U.S. government revenue increased 45% to $373 million. Overall commercial revenue grew 33% to $397 million, indicating slower adoption in regions like Europe compared to the U.S.

Recent developments suggest that Europe is beginning to adopt AI more broadly, which could boost Palantir's international commercial sales. Globally, government revenue rose 45% year over year to $487 million, showing worldwide interest in AI solutions.

Palantir’s total revenue growth reached 39% year over year, with management projecting a 38% growth rate in Q2. However, it's worth noting that management often exceeds its own guidance.

The Stock’s Valuation and What It Means

Despite the solid revenue growth, the stock price has outpaced the business performance significantly. While revenue grew 39% in Q1, Palantir’s stock has increased more than 700% since early 2024.

This jump pushed the stock’s valuation from a typical 10-20 times sales range for software companies to an extraordinary 110 times sales. Such a high multiple reflects sky-high expectations, which may be difficult to meet.

To put this in perspective, consider these assumptions:

• Revenue growth accelerates to 50% annually for five years.
• Profit margins improve to an industry-leading 30%.
• The share count remains flat (although it has actually increased by 7% year over year).

If all these occur, Palantir’s revenue could grow from $3.12 billion to $23.7 billion, and profits from $571 million to $7.1 billion. In that scenario, Palantir would indeed be a once-in-a-generation company.

However, even with these optimistic figures, the stock would trade at about 46 times earnings in five years. For comparison, Nvidia (NASDAQ: NVDA), which had a 69% revenue growth in Q1, also trades around 46 times earnings today.

This comparison suggests limited upside for Palantir’s stock beyond hype. The rapid run-up places the stock in a vulnerable position. While Palantir’s business fundamentals are strong, the current valuation leaves little margin for error. Any misstep could trigger a sharp sell-off.

For government professionals interested in AI and data analytics, Palantir’s technology remains relevant. If you want to explore practical AI skills that apply in government and commercial sectors, consider checking out Complete AI Training's courses by job role for targeted learning options.