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Palantir Technologies (PLTR) has seen its stock tumble nearly 30% from recent highs as part of a broader market selloff. The data analytics and AI platform provider has not been immune to the recent stock market crash that has sent the tech-heavy Nasdaq down more than 20% in 2025.

The company’s stock had been on a tear since early 2025 before hitting a 52-week high on February 18. Since then, it has fallen between 29% and 38%, depending on the measuring point.

Despite the recent pullback, Palantir has delivered impressive returns since its September 2020 IPO, with shares up 714%. Most of these gains came after the launch of its Artificial Intelligence Platform (AIP) in April 2023.

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Palantir Technologies Inc. (PLTR)

Growth Accelerates with AI Platform

Palantir’s business has been transformed by its AI platform. The company originally developed data gathering and analytics tools used by the U.S. government to fight terrorists and drug cartels.

It has since evolved to create an AI operating system that connects digital assets with real-world counterparts. This helps both commercial and government customers apply AI to solve practical problems.

The platform’s success is evident in Palantir’s accelerating growth metrics. Customer count increased 43% year-over-year in Q4 2024.

Even more impressive has been the growth in large deals. The number of contracts worth $1 million or more grew 25% compared to the previous year. Deals over $5 million jumped 57% in the same period.

Total contract value surged 56% to $1.8 billion, while the company’s remaining deal value rose 40% to $5.4 billion. This growing backlog suggests future revenue growth could accelerate beyond the 36% reported last quarter.

Government Spending Uncertainty

Palantir’s government business faces both challenges and opportunities in the current environment. The company counts the U.S. government as its largest customer, particularly the Department of Defense.

Recent Department of Government Efficiency (DOGE) initiatives call for the DOD to cut its budget by 8% annually over the next five years. These cuts could put pressure on Palantir’s government contracts.

However, CEO Alex Karp has suggested Palantir could actually benefit from these efficiency initiatives. The company’s solutions help create cost savings and efficiencies, potentially making them more valuable during budget constraints.

A recent directive for the DOD to default to rapid acquisition processes when buying software could also benefit Palantir. This change should reduce procurement times and limit custom solutions, playing to Palantir’s strengths.

Valuation Remains a Concern

The biggest question for investors remains Palantir’s valuation. Even after the recent pullback, the stock trades at a forward price-to-sales ratio between 48 and 66 times, depending on the estimate used.

This premium valuation is more than double what software-as-a-service companies traded at during their 2021 peak. Palantir’s forward P/E ratio stands at approximately 145, reflecting high growth expectations already baked into the price.

Such lofty multiples typically come under greater scrutiny during market downturns. Investors are questioning whether Palantir’s long-term potential is already captured in its current valuation.

The company has been improving its margin profile over the past two years. Operating margins have expanded as the business scales and customers increase their spending.

This trend suggests Palantir could continue to grow earnings faster than revenue in coming years. The improved unit economics come from the company’s ability to expand relationships with existing customers.

Long-Term Growth Runway

Despite valuation concerns, Palantir’s long-term opportunity remains enormous. The company is positioned in the rapidly expanding AI software market.

Market research from Roots Analysis projects the AI software market will grow to $5.2 trillion in annual revenue by 2035. This represents a compound annual growth rate of approximately 31% over the next decade.

Palantir has been ranked as the top vendor of AI software platforms by multiple research firms including IDC and Forrester. This leadership position has helped the company attract new customers and expand existing relationships.

The productivity gains that customers are achieving with Palantir’s AIP platform suggest the company can sustain strong growth rates over the next decade. With current revenue of just over $2 billion annually, Palantir is still scratching the surface of its market opportunity.

Some analysts believe Palantir has the potential to become a $1 trillion company over the long term. However, investors may need patience given the current market turbulence and valuation concerns.

For now, the prudent approach may be to start small positions and add during further market weakness. Those with a decade-long investment horizon could see substantial returns if Palantir executes on its growth potential.

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