Since hitting a 52-week high of $207.52 on November 3 last year, shares of big-data analytics company Palantir Technologies (PLTR) have pulled back approximately 38%, currently trading around $129. Just as the market questions its expensive valuation, Wall Street has issued an upgrade to “Buy” this week, with the rationale being — earnings have finally caught up with the price.
The judgment is backed by solid data. A year ago, Palantir earned just $0.08 per quarter; in the most recent first quarter, earnings per share reached $0.34, up 154% year-over-year. While the stock shed more than a third of its value, the underlying business accelerated: first-quarter revenue grew 85% year-over-year to $1.63 billion, and 16% sequentially; U.S. commercial revenue surged 133%. GAAP net income reached $871 million, representing a 53% profit margin, while adjusted free cash flow came in at $925 million, a 57% margin. The company also holds $8 billion in cash and short-term Treasuries on its balance sheet.
Forward-looking indicators also point to strong momentum. During the quarter, the company signed 206 deals worth at least $1 million each, with new customer total contract value reaching $2.41 billion, up 61% year-over-year. Remaining performance obligations stood at an impressive $11.8 billion, nearly doubling from the prior-year period, providing a solid revenue pipeline. Management also raised full-year guidance in May: revenue is now expected to reach approximately $7.65 billion, representing 71% growth, with U.S. commercial revenue climbing at least 120%.
However, even the strongest fundamentals cannot escape the valuation question. Palantir currently trades at about 145 times earnings and roughly 86 times forward earnings — though well below peak levels, these multiples remain astronomical even by S&P 500 standards. By the “Rule of 40” (growth rate plus adjusted operating margin ≥ 40%) commonly used by software investors, the company scored an impressive 145 in the first quarter. But an 86x forward earnings multiple implies the market has already priced in extremely high growth expectations, leaving virtually no room for error.
Risks cannot be ignored. Government spending cycles are subject to change, and the AI software space is facing competition from all directions — the market is particularly concerned that AI startup Anthropic could erode Palantir’s market share. Furthermore, with a market capitalization of approximately $310 billion, Palantir already ranks among the world’s largest software companies, meaning the era of easy doubling is likely behind it. Should growth unexpectedly slow meaningfully, the downside pressure from an 86x valuation would be severe.
Wall Street analysts have a median 12-month price target of $200, implying 55% upside from current levels, with 21 analysts rating it a “Buy,” 11 a “Hold,” and 2 a “Sell.” Consensus estimates project EPS will jump 97% to $1.48 in 2026, but growth forecasts for 2027 moderate to 42%.
Overall, Palantir’s current price level appears more suitable for a “Hold” than a “Buy.” The fundamentals could potentially justify the current stock price — but the key word is “could.” At 86 times forward earnings, investors would likely prefer to establish a margin of safety at a price meaningfully below their estimate of intrinsic value, to guard against the risk of growth falling short of expectations.
