Palantir Technologies (PLTR +4.17%) has been a non-stop thrill ride for investors over the past few years. The company debuted its Artificial Intelligence Platform (AIP) in early 2023, providing an artificial intelligence (AI) tool that solved real-world business problems. Since then, the company’s growth has been stellar, but its stock price has been volatile. For example, the stock soared 2,350% over the next two-and-a-half years, but has since shed 48% of its value (as of this writing).
You might be tempted to think the business has suffered, but quite the opposite is true. So how do we explain the apparent disparity? Palantir bulls argue the company’s AI tools have no direct competitors, while bears say the stock is overpriced. That ongoing tug-of-war is at the heart of the conundrum.
However, a look at the evidence shows us where Palantir’s stock price could be over the next couple of years.
Image source: The Motley Fool.
What’s driving the financial performance?
Palantir got its start by developing AI systems for the U.S. intelligence and military communities, before adapting its tools to benefit a broad cross-section of government agencies. The company pioneered the use of ontology, an AI system that connects to all levels of organizational software.
By compiling the information into a knowledge graph, the system can offer near-real-time solutions to common business problems — using the organization’s own data as a guide. Palantir’s AIP provides actionable insights that help managers make critical business decisions based on the data. In this way, customers get real value from AI, something most AI systems lack.
Palantir’s approach has been groundbreaking, and the results speak for themselves. In Q1, the company generated revenue that soared 85% year over year to $1.63 billion, which marked the company’s highest-ever year-over-year growth rate and the 11th consecutive quarter of accelerating revenue growth. Profitability also surged, with adjusted earnings per share (EPS) up 154% to $0.33.
The biggest contributor to Palantir’s results was the U.S. commercial segment, which saw revenue jump 133% to $595 million. The government business continues to make its mark, with revenue up 84% to $687 million.
This helps to illustrate the ongoing strength of Palantir’s business and financial results, which show no signs of slowing.
The mathematical path forward
Applying Palantir’s most recent growth rate can provide an estimate regarding where Palantir’s stock price could be by the end of next year — though we’ll have to make a few assumptions.
Today’s Change
(4.17%) $4.71
Current Price
$117.64
Key Data Points
Market Cap
$271B
Day’s Range
$115.67 – $119.06
52wk Range
$106.37 – $207.52
Volume
547.5K
Avg Vol
44.9M
Gross Margin
84.07%
Palantir’s full fiscal 2026 outlook forecasts revenue of $7.66 billion at the midpoint of its guidance, or year-over-year growth of 71% — though management’s outlook has historically been conservative. Despite the ongoing acceleration, let’s assume Palantir can maintain that growth rate into next year — despite its track record of accelerating growth. That would result in 2027 revenue of roughly $13.1 billion.
The company’s profit margin has been rising consistently since the beginning of last year, currently poised at 53%. In the interest of conservatism, let’s cap it at 53% through the end of 2027 (though its track record suggests it will increase). If Palantir generates revenue of $13.1 billion next year at a 53% profit margin, that would result in net income of roughly $6.9 billion and EPS of $2.70, using its current share count of 2.57 billion.
Taking that one step further, if Palantir’s valuation stays constant at 121 times earnings (though it will probably change), the stock price could triple from here, rising 203% to $326 — driving Palantir’s market cap to $840 billion.
Fun with numbers
It’s important to note that this thought exercise is only one possible scenario: change any of the assumptions, and the results would change as well. If its accelerating growth were to cool, if the adoption of AI were to slow, or the economy were to hit a snag, investors would likely rethink the company’s lofty multiple, sending the stock lower.
Despite the stock’s recent declines, Palantir still commands a premium valuation, as highlighted above, of 121 times earnings, but other metrics offer a different perspective.
The price-to-earnings ratio is one of the most commonly used valuation metrics, but it isn’t optimal for valuing high-growth stocks. Using the more appropriate price/earnings-to-growth (PEG) ratio returns a multiple of 0.42, where any number less than 1 is the standard for an undervalued stock.
Given the available evidence, the company’s accelerating growth, and sizable opportunity ahead, I would argue that Palantir stock is a buy — especially after its 48% haircut.
