Palantir has been a top-performing AI stock for the past three years. Palantir Technologies (PLTR) has demonstrated impressive growth, with its stock increasing by 167% in 2023, 341% in 2024, and currently showing around 147% growth in 2025. Repeatedly achieving such gains over three consecutive years is quite rare.
Looking ahead, questions arise about whether Palantir can maintain this growth in 2026 or if it may face a slowdown.
Palantir specializes in AI-driven data analytics software, initially designed for government use but now widely adopted in the commercial sector. The demand for AI-enhanced productivity tools remains high, positioning Palantir favorably in the market. A key offering is its AIP add-on, which integrates generative AI for varying levels of automation, greatly contributing to revenue growth that continued to accelerate in recent quarters.
In the third quarter, Palantir’s revenue grew by 63%, a significant increase over the previous quarter, with continuing growth since 2024. The company experienced notable revenue boosts from both government and commercial clients, with government revenue growing by 55% to $633 million and commercial revenue up 73% to $548 million. Despite these impressive figures, there is still considerable room for growth in the U.S. commercial sector, where Palantir has 530 clients.
However, the rapid growth pace is unsustainable long-term, which raises concerns about existing market expectations.
Since 2023, Palantir’s stock has surged by over 2,700%, while revenue has only increased by 104%. This indicates that much of the stock price increase is due to investors being willing to pay more, a trend not limited to Palantir but seen across many stocks. Comparatively, most software companies trade at 10 to 20 times sales, with top performers reaching around 30 times. Palantir currently trades far beyond these figures.
With a valuation of 120 times sales and 254 times forward earnings, Palantir is one of the most expensive stocks on the market. There are high expectations built into this valuation, which may be difficult for the company to meet. A more sustainable valuation could be at 50 times earnings, which, under current profit margins, would equate to a 20 times forward price-to-sales ratio.
Achieving a 50 times forward earnings multiple from the current 254 would necessitate a fivefold increase in earnings, a significant challenge. Even with continued revenue growth at 60%, reaching this valuation may take several years. Analysts predict that Palantir’s growth will decelerate in 2026, with average estimates indicating a growth rate of 41%, potentially lengthening the timeline to reach a more reasonable valuation.
Given these trends, it is anticipated that 2026 could be a moderate or down year for Palantir’s stock. The rapid increase in valuation suggests a pullback could occur, making it advisable for investors to approach with caution.
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