Palantir (PLTR) stock has rallied quite significantly over the past couple of years, rising more than 2,000% since 2022. This stellar growth in its share price reflects significant demand for its artificial intelligence (AI) product suite, particularly its Artificial Intelligence Platform (AIP), which is leading explosive growth.
This rapid rise, however, has driven Palantir’s valuation significantly higher. Palantir currently trades at a price-sales ratio of 134.42x and a forward price-earnings multiple north of 738x. Typically, such high valuations might give investors pause. Yet, Palantir has continued to defy expectations by sustaining hypergrowth and expanding its footprint in enterprise AI.
The company’s most recent quarterly earnings highlight this trajectory. For the first time, Palantir’s revenue crossed the $1 billion mark in a single quarter, with year-over-year growth accelerating to 48%. The pace of revenue growth has consistently accelerated over the past several quarters, which is a sign that demand for its solutions is only rising.
With expectations running high, can Palantir continue to deliver hypergrowth, supporting its rally and hitting Wall Street’s highest price target of $200 in 2025, or will its lofty valuation finally catch up and put a cap on the stock? Let’s find out.
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Strong demand for AIP is likely to support Palantir’s growth in the U.S. The platform is helping expand relationships with existing customers while also winning new ones.
For instance, revenue from U.S. commercial operations grew 93% year-over-year and 20% sequentially, lifting the segment’s share of total revenue to 31% from 23% a year earlier. This acceleration suggests that Palantir’s AIP is finding demand among enterprises seeking production-level AI solutions. The company’s contract momentum strengthens that point. Notably, U.S. commercial total contract value (TCV) bookings reached $843 million in the quarter, representing a 222% year-over-year increase. On a trailing twelve-month basis, the company has secured $2.8 billion in U.S. commercial bookings, representing 141% growth. The customer base is also expanding, with 485 U.S. commercial customers at quarter-end, a 64% increase from last year.
The company’s government segment, which is a key part of its business, delivered 53% year-over-year growth and 14% sequential growth in the U.S. That performance was supported by large-scale contracts, including a $218 million award from the U.S. Space Force and an expansion of the Maven Smart System contract ceiling by $795 million. Further, Palantir received a 10-year contract with the U.S. Army worth up to $10 billion, which consolidated 75 contracts into a single framework.
Overall, Palantir reported record contract activity, with $2.3 billion in TCV and $684 million in annual contract value (ACV) during the last quarter. The company closed 157 deals worth at least $1 million, including 42 contracts above $10 million. Its top 20 customers are also expanding their spending, averaging $75 million in trailing 12-month revenue, up 30% from the prior year.
Retention metrics reflect this expansion. Net dollar retention improved to 128%, an increase of 400 basis points sequentially. At quarter-end, Palantir’s total remaining deal value was $7.1 billion, up 65% year-over-year, while remaining performance obligations stood at $2.4 billion, up 77%.
On profitability, Palantir is performing well and significantly expanding its margins. It expects adjusted operating margins to grow in the second half of the year, though it also flagged higher near-term expenses from seasonal hiring.
Analysts, for now, remain cautious. Palantir stock holds a consensus “Hold” rating, primarily due to its elevated valuation. Still, the Street’s highest price target of $200 represents only about a 20% gain from yesterday’s close of $166.74.
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That target doesn’t seem far-fetched. Palantir has been reporting strong top-line growth while also expanding its margins, signaling that its business momentum remains intact. The company recently issued guidance calling for $1.085 billion in revenue for the current quarter, implying an increase of more than 8% from the prior period. Notably, this represents its highest sequential revenue growth outlook and a staggering 50% jump from the year before.
Management also boosted its full-year 2025 revenue forecast. The midpoint now stands at $4.146 billion, reflecting a 45% year-over-year increase. That’s a nine-point improvement from last quarter’s projection and the biggest annual revenue guidance raise in Palantir’s history. In short, as Palantir is likely to sustain its hyper-growth rate, the $200 milestone looks well within reach for its stock.
On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
