Is Palantir Technologies Stock a Buy Now?

Key Points

• Palantir Technologies' growth has shifted into a higher gear thanks to the solid demand for its artificial intelligence software offerings.

• The company seems capable of sustaining its terrific growth considering the huge end-market opportunity.

• However, investors need to closely watch the company's valuation before making an investment in this high-flying stock.

• 10 stocks we like better than Palantir Technologies ›

Palantir Technologies (NASDAQ: PLTR) is a software platform provider that has been gaining prominence thanks to the improving demand for its artificial intelligence (AI)-focused solutions, and that has led to a phenomenal increase in the company's stock price in the past year.

Palantir stock shot up 411% in just one year. Let's see why that has been the case, and check if buying this AI stock after such remarkable gains would be the right thing to do.

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Image source: Getty Images.

Palantir's growth trajectory is improving

Palantir's stunning rally can be credited to an improvement in its growth profile in the past year as the demand for its AI software platform is bringing more business into the company's fold. This is evident from the following chart, which shows an upward swing in Palantir's top-line growth in the past couple of years.

PLTR Revenue (Quarterly) data by YCharts.

Looking ahead, Palantir is quite capable of sustaining this upward growth trajectory considering the pace at which it is winning new business and expanding its customer base thanks to AI. Palantir's customer count jumped by 39% year over year in the first quarter of 2025. Apart from this healthy increase in the customer count, Palantir benefited from the size of the deals that it landed.

For instance, there was a 60% increase in the number of deals worth $1 million or more during the quarter. What's more, bigger deal sizes also increased significantly, with transactions worth at least $5 million and $10 million nearly doubling year over year. This explains why the total contract value booked by Palantir in Q1 jumped 66% year over year to $1.5 billion, outpacing the 39% increase in its top line to $884 million.

It won't be surprising to see Palantir's healthy deal momentum continue on account of the productivity gains that its Artificial Intelligence Platform (AIP) is delivering to customers. Palantir's AIP enables customers to integrate generative AI tools into their operations, powered by real-time data to improve decision-making.

Palantir management has pointed out several instances where AIP has led to a sharp improvement in productivity for its customers, and that has led to an expansion in the adoption of this platform. Not surprisingly, Palantir is looking to push the envelope further on the product development front.

Management pointed out on the May earnings conference call that AIP has "entered the next phase of product development and adoption focused on enterprise autonomy." The company claims that it is now working on deploying AI agents that could increase productivity by a whopping 50 times. All this clearly indicates that Palantir is pulling the right strings to make the most of the AI software-platforms market that's expected to clock a compound annual growth rate (CAGR) of 51% over the next three years.

This fast-growing opportunity, along with Palantir's solid unit economics that are being driven by the expanded use of its AIP by existing customers, should set the company up for impressive bottom-line growth in the long run. As such, it is easy to see why Palantir's bottom-line growth is expected to accelerate.

PLTR EPS Estimates for Current Fiscal Year data by YCharts.

Analysts, however, are expecting this AI stock to pull back

Only a fourth of the 28 analysts covering Palantir recommend buying the stock right now. The majority -- 57% -- rate Palantir at hold, while the rest recommend selling it. Moreover, the median 12-month price target of $110 points toward a 21% drop from current levels.

It is easy to see why analysts aren't expecting upside from Palantir despite its impressive growth and sunny prospects -- the stock's valuation has reached astronomical levels. A trailing earnings multiple of 605 is too rich despite the growth that Palantir has been clocking. Even the sales multiple of 111 is very high.

Of course, the forward earnings multiple of 250 points toward a significant jump in the company's bottom line, but even that's way too high. So, anyone looking to buy Palantir stock right now needs to be prepared for a lot of volatility since it will have to continue outperforming expectations handsomely to justify its valuation.

Any signs of weakness could send the stock packing. However, if there's indeed a pullback in Palantir stock, savvy investors should consider accumulating it as the long-term growth opportunity is good enough to help it become a winner in the long run. So, even though buying Palantir stock is a risky proposition right now, the potential long-term reward is the reason why investors should keep an eye on it and buy the dips.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.