Palantir Stock is Up 51% YTD: Is PLTR Still a Buy?

Palantir Technologies (PLTR) has been one of the standout performers in 2025, with its stock climbing 51% year-to-date. This surge has come despite broader market volatility and tightening government budgets. Notably, the growing adoption of its artificial intelligence platform across public and private sectors has driven its financials and share price. The U.S. government, in particular, has remained a key customer, with agencies and defense departments leveraging Palantir’s software.

While the expected reduction in the government’s defense budget poses challenges, political dynamics have largely played into Palantir’s favor. Under President Donald Trump, efforts to rein in federal spending have opened doors for Palantir, whose AI-driven solutions promise efficiency and cost-effectiveness. With its reputation as a cutting-edge software firm and a trusted government collaborator, Palantir is well-positioned to deepen existing partnerships and secure new federal contracts.

Further fueling investor optimism is Palantir’s recent alliance with Alphabet’s (GOOGL) Google. The two tech companies announced a partnership to integrate Google Cloud into Palantir’s FedStart platform. FedStart provides a fast track for companies to bring their solutions to federal agencies. This collaboration will bolster Palantir’s product offering and position it as a key player in delivering scalable AI solutions to the U.S. government.

Despite the tailwinds, Palantir’s stock is not without risks. Palantir stock trades at a high valuation, reflecting high expectations for continued growth. If those expectations falter due to political shifts, spending delays, or broader economic concerns, the stock’s lofty valuation could come under pressure.

Palantir: Strong Growth, But Risks Remain

Palantir Technologies has been delivering solid revenue growth, soaring from 13% in Q2 2023 to 36% in Q4 2024. The rising demand for AI solutions is a major driver of this acceleration. Its revenue from U.S. government contracts jumped 45% year-over-year in Q4 as federal agencies increasingly utilized Palantir’s AI-powered software for national security and defense operations.

Government contracts account for a larger portion of Palantir’s total revenue, which creates potential risks. Any cuts in defense spending could impact the company’s financial stability.

On a positive note, Palantir’s commercial business is witnessing an acceleration in growth, helping to diversify its revenue streams. The company’s Artificial Intelligence Platform (AIP) has seen rising adoption, driving new customer acquisitions and generating higher engagement from existing ones.

Palantir’s U.S. commercial revenue surged 64% in Q4 2024, reaching $214 million. For the full year, it grew 54% to $702 million. The total contract value for U.S. commercial business soared by 134%, and the client base expanded by 73%, reflecting strong demand across industries.

Palantir expects U.S. commercial revenue to exceed $1.079 billion in 2025, with total revenue projected to grow 31%. While commercial growth is promising, the key challenge remains whether it can compensate for potential government revenue slowdowns.

Is Palantir’s Stock Still Worth the Hype?

Palantir has experienced notable growth in recent months, but its high valuation raises concerns. Currently, the stock is trading at an exceptionally high price-to-sales (P/S) ratio of 92.3x. To put it simply, investors are paying a premium for each dollar of revenue Palantir generates.

In addition, the stock’s price-earnings (P/E) ratio stands at a staggering 309.5x, based on expected earnings per share (EPS) of $0.37 for 2026. This suggests that investors are pricing in a lot of future growth.

However, these lofty numbers mean Palantir stock is vulnerable to any slowdown in growth or broader economic turbulence. In summary, while Palantir has shown impressive growth, its high valuation might make it a risky bet for investors.

Final Thoughts

Palantir has emerged as a software leader in the enterprise AI space and is witnessing higher adoption of its platform. PLTR is poised to benefit from growing demand for its solutions from both the government and commercial sectors. However, its elevated valuation, high reliance on the government sector, and the uncertainty surrounding macroeconomic conditions present significant risks. Further, the company needs to grow its commercial revenue faster to justify its expensive stock price.

Currently, Wall Street maintains a “Hold” consensus rating on PLTR. Their average price target of $84 implies downside potential from current levels.

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. For more information please view the Barchart Disclosure Policy here.