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Palantir (PLTR) is a data analytics and artificial intelligence (AI) company that focuses on software solutions for government and commercial clients. Palantir stock had a great run in 2024, rising by 340%, wildly outperforming the overall market gain of 24%. The company’s addition to the S&P 500 Index ($SPX) and the Nasdaq-100 ($IUXX) last year fueled the rally even further.
Palantir continues to be a key player in AI-driven data analytics with outstanding financials. However, a few red flags, such as its high valuation and insider stock sales, have made analysts skeptical. So far this year, PLTR has gained 4.1% but is down nearly 40% from its 52-week high.
Let’s dig in to find out if this AI stock is still a buy.
Palantir’s Financials Are Getting Better
With a market capitalization of $199.1 billion, Palantir’s advantage stems from its ability to analyze large datasets and provide actionable intelligence. With a growing reliance on AI-driven decision-making, its software platforms have become indispensable to many businesses. Palantir primarily operates through two platforms. The first is Gotham, which is used by government agencies, such as the U.S. Department of Defense, CIA, and even international government organizations for intelligence gathering, counterterrorism, and national security. Its other platform, Foundry, is primarily used by commercial businesses to optimize operations and manage data. Palantir has reported consistent revenue growth, driven by government contracts that account for a chunk of its revenue and an expanding commercial customer base.
In the fourth quarter, government segment revenue increased 40% year-over-year to $455 million, accounting for 55% of total revenue. Commercial segment revenue increased by 31% year-over-year. Palantir’s total revenue for the quarter stood at $828 million, up 36% year-over-year. The company struggled with profitability at first, but is now profitable, with a net profit of $0.14 per share in Q4, a 75% increase over the year-ago quarter. For the year, revenue increased by 29% to $2.8 billion, while adjusted earnings rose 64% from 2023. Palantir's business model is robust, with long-term contracts with government agencies that could generate consistent recurring revenue. During the quarter, the company closed 32 deals worth at least $10 million. It also extended its long-standing partnership with the U.S. Army for an additional four years for a $618.9 million contract.
On the balance sheet, Palantir had $5.2 billion in cash, cash equivalents, and short-term U.S. Treasury securities, along with $1.25 billion adjusted free cash flow (FCF). The company anticipates generating FCF of $1.5 billion to $1.7 billion in 2025. While government contracts have been Palantir’s bread and butter, the company is rapidly expanding into the commercial sector. Major companies in finance, healthcare, and manufacturing are using the Foundry platform for data-driven decision-making.
Analysts who follow Palantir expect revenue and earnings to grow by 32% and 35.8%, respectively, in 2025. Revenue and earnings are expected to increase by 26.4% and 25.5% in 2026.
Why Are Analysts So Bearish About PLTR Stock Then?
While the growth estimates for the next two years are encouraging, analysts remain neutral on Palantir stock, owing to its high valuation. The stock has a “Hold” rating on Wall Street. It is trading at 152 times forward 2025 earnings and 52 times forward 2025 revenue, higher than peers in the AI software industry and its own five-year historical average. However, this high valuation also indicates that investors believe this AI stock has long-term growth potential.
Secondly, insider trading has also fueled the bearish sentiment. Notably, CEO Alex Karp implemented a new trading plan under Rule 10b5-1, allowing him to sell up to 9.975 million shares by Sept. 12, 2025. This move followed Karp’s previous plan under which he sold 40 million shares for $1.9 billion in 2024. Investors tend to perceive these insider transactions as negatives, raising concerns about the company’s future prospects. Based on this news, Jefferies analyst Brent Thill maintains Palantir’s “Underperform” rating. Separately, William Blair analyst Louie DiPalma rates the stock a “Hold.”
Furthermore, while government contracts generate recurring revenue, they expose Palantir to the risks associated with federal budgetary decisions. Recent reports of planned 8% annual budget cuts in the Department of Defense over the next five years have raised investor concerns about the impact on Palantir’s reliance on government contracts. However, Wedbush analyst Dan Ives believes this could be a fantastic opportunity for Palantir. According to Ives, President Donald Trump’s administration is more concerned with cutting budgets for unprofitable initiatives and investing more in AI-enabled solutions, which could mean more contracts for Palantir. Ives maintained his “Buy” rating on the stock, with a $120 price target implying roughly 40% upside from current levels.
Of the 19 analysts covering PLTR stock, three recommend a “Strong Buy,” 11 suggest to “ Hold,” one says it is a “Moderate Sell,” and four have given it a “Strong Sell” rating. Palantir is trading close to its average target price of $85.11. Plus, its high price estimate of $141 suggests upside potential of 80% from current levels.
Palantir’s progress in diversifying its revenue streams, combined with strong growth potential in the AI and data analytics sectors, positions the company for future growth. Palantir represents an exciting opportunity for long-term investors who believe in the potential of AI-driven analytics and are willing to take the risk. Others may want to consider their risk tolerance before investing in Palantir stock.
