Palantir Technologies, a leading provider of AI-powered data analytics, continues to experience rapid business growth, yet concerns about its stock valuation loom large. Following a remarkable surge in 2025, Palantir’s shares have slid approximately 7% since the start of 2026, raising questions among investors regarding whether the stock is already priced for optimal performance.
Currently, Palantir is witnessing impressive growth in its revenue, primarily driven by the adoption of its Artificial Intelligence Platform (AIP) among clients looking to enhance their operational efficiency. In the fiscal third quarter, the company reported a staggering 63% increase in revenue year over year, a notable leap from the previous quarter’s 48% growth.
The company is diversifying its revenue streams, notably looking beyond its previous heavy dependence on U.S. government contracts. In fiscal Q3, U.S. commercial revenue surged 121% compared to the same quarter last year, compared to a 93% growth rate in fiscal Q2. Palantir’s co-founder and CEO, Alex Karp, emphasized the transformative capabilities of AIP during the earnings release.
However, comparisons with other data platform companies like Snowflake—a rival in the AI data sector—underscore potential vulnerabilities. Snowflake previously enjoyed higher growth rates, boasting a remarkable 115% year-over-year revenue increase in its fiscal 2021 third quarter. Yet, as growth inevitably slowed, investor expectations adjusted accordingly, leading to a 24% decline in its stock over five years. In stark contrast, the S&P 500 saw an 81% increase in that timeframe.
Despite Palantir’s remarkable growth, caution is warranted as the stock’s current valuation appears elevated. It trades at a forward price-to-earnings ratio of 167, indicating that investors are expecting not just sustained growth but extraordinary growth moving forward. To justify this valuation, analysts suggest that Palantir’s revenue must compound at an average rate of 30% and earnings at an even higher rate over the next five years.
Importantly, while the outlook for fiscal Q4 seems promising—with guidance indicating a year-over-year growth rate of more than 60%—the future remains uncertain. Any slowdown in revenue could translate to a significant reassessment of the stock’s valuation.
Palantir’s performance and business model are commendable, warranting thorough examination. However, given its current stock price, the margin for error is slim, leading to speculation about the possibility of the stock dipping even lower this year. As it stands, investing in Palantir at this valuation could be a high-risk endeavor.
