Could Buying Palantir Technologies Stock Today Set You Up for Life?

Key Points

• Palantir Technologies has been the best-performing stock in the S&P 500 since the start of 2024, driven by robust revenue growth and soaring profits.

• The company's groundbreaking Artificial Intelligence Platform (AIP) has helped fuel its stunning growth.

• An artificial intelligence (AI)-fueled boom has driven Palantir's sales and income higher, and the road ahead appears long, but its soaring valuation is an overhang.

While the advent of generative AI is relatively recent, Palantir Technologies (NASDAQ: PLTR) has been providing data mining and artificial intelligence (AI) solutions for over two decades. While the company's earliest customers were government entities, the biggest opportunity right now is AI for enterprise. By providing turnkey solutions to everyday business problems, Palantir has established itself as a leading provider of AI software, which has fueled the company's impressive growth.

Palantir's prospects and impressive execution haven't been lost on investors, who have been scooping up shares at a rapid pace, and the combination of operational and financial performance has fueled a soaring stock price. In fact, Palantir was the best-performing stock on the S&P 500 (SNPINDEX: ^GSPC) in 2024, notching gains of 341%. The stock has retained that title so far this year, gaining 80% during the first six months of 2025. The stock surge has come with a corresponding spike in its valuation, even as Palantir's profits have accelerated.

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With that as a backdrop, could buying Palantir today set you up for life? Let's see what the evidence suggests.

Image source: Getty Images.

Helping to drive the AI revolution

Palantir's business is much more straightforward than it might appear at first glance. It created a software platform that integrates with various business systems -- accounting, sales, shipping, inventory, and more -- and analyzes the information to help users make data-driven decisions in real time. The company's flagship product, its Artificial Intelligence Platform (AIP), is revolutionary in its capabilities, and government and business customers are scrambling to adopt this game-changing technology.

For example, the Cleveland Clinic deployed AIP to help improve patient care. It was able to decrease waiting time in the emergency room by 38 minutes on average, reduce unused orthopedic operating room time by 40%, and decrease the time spent calculating bed capacity by 75% -- all of which saved not only time but money.

Palantir also developed a game-changing strategy to educate its customers on the potential use cases of AIP. The company began hosting boot camps, pairing Palantir engineers with customers to help develop mission-critical AI solutions to their real-world business problems. The company notes that it can go "from zero to use case in five days."

Scott Raymond, chief information officer of Nebraska Medicine, noted that the company has 1,011 applications connected to its Palantir software, saying in a Palantir business update, "I can just point a problem at it and get data in a meaningful way." The ability to easily solve these types of problems sets Palantir apart and helps illustrate the value of AIP to business leaders.

The proof is in the results

The utility of AIP is evident in Palantir's financial results. The company's first-quarter revenue grew 39% year over year to $884 million, while its adjusted earnings per share (EPS) of $0.13 surged 63% -- and even that only tells part of the story. While Palantir's government segment continued to notch consistent mid-double-digit revenue growth, it was AIP that stole the show.

U.S. commercial revenue soared 71% year over year and 19% quarter over quarter, which shows that demand for AIP is accelerating. Management also noted that Palantir booked its highest-ever quarter of U.S. commercial total contract value (TCV) of $810 million, up 183%. That helped fuel U.S. commercial remaining deal value (RCV) of $2.32 billion, up 127%.

Software-as-a-service (SaaS) companies -- including Palantir -- are often judged using the so-called "Rule of 40," which evaluates the balance between growth and profitability. Any number above 40% is considered desirable, so Palantir's score of 83% is superb. Furthermore, only about one-third of software companies ever reach this benchmark, according to management consulting firm McKinsey & Company, helping to illustrate the strength of Palantir's business.

Every rose has its thorns

Palantir's business and financial results are clearly firing on all cylinders, but if you'll forgive me for mixing metaphors, there's a fly in the ointment. The stock currently trades for a whopping 186 times next year's expected earnings, which is enough to send most investors running for cover.

Valuation metrics have their limitations, particularly for high-growth companies like Palantir. The company's robust sales and profit growth make it difficult to pin down just what its business could be worth three to five years from now. If Palantir's growth continues to accelerate at its current rate, today's price could ultimately be a bargain. Investors looking to get in on the action without betting the farm might consider buying a small position or using dollar-cost averaging to build a position over time.

So, could buying Palantir stock today set you up for life? The answer is an unqualified "maybe." The company is executing at a high level, and there's a good chance the stock will be worth more in the future, but the road ahead will be paved with volatility. There are a lot of moving parts to this story, and no one can know for sure if the adoption of AI will continue. If it does, however, Palantir is well-positioned to ride those secular tailwinds to new heights.

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Danny Vena has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.