One of the most interesting aspects of the rise of artificial intelligence (AI) is how the technology has allowed some companies to reinvent themselves. Carry Palantir Technologies(NASDAQ: PLTR) as an excellent example.
Before the AI revolution, Palantir was primarily seen as a secretive data mining company that worked closely with the Department of Defense (DOD). But today? The company seems to be everywhere. Beyond the defense landscape, large private companies in healthcare, financial services, manufacturing and more are touting unprecedented efficiency gains thanks to Palantir’s Artificial Intelligence Platform (AIP).
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Let’s see what makes it unique and analyze how AI has become a benchmark for the company. From there, we’ll do a valuation analysis to help determine if Palantir is a good fit for your portfolio.
Image source: Getty Images.
One of the most widespread AI inventions to date is the large language model (LLM), such as ChatGPT, Gemini or Claude. They employ generative AI to help users perform tasks more efficiently.
In addition to answering a general query, LLMs can be integrated with adjacent software programs to help digest large volumes of data. In turn, generative AI can use this information to help engineers write software code or help a data scientist quickly sift through complicated inputs to more easily arrive at an optimal solution to a sophisticated problem.
Palantir focuses on designing ontologies, which are detailed visualized maps that can zoom into a company’s most granular levels of data. This is advantageous because it helps decision makers model and simulate different scenarios based on real-time information, rather than being stuck with a retrospective dashboard tool.
Given the broad base of Palantir’s AIP platform, it’s no surprise that Wall Street sees a huge opportunity. morning star Analyst Mark Giarelli writes that “between $1.2 and $1.8 trillion is possible” for Palantir’s total addressable market (TAM).
On February 2, management reported earnings for the fourth quarter and full year 2025. Spoiler alert: Palantir lifted the lid. For the full year, revenue grew 56% year over year to $4.5 billion. The company’s non-government segment is thriving, with U.S. private sector sales growing 109% year over year to $1.5 billion.
The pace at which Palantir’s top line is accelerating is certainly impressive. But what’s even more encouraging is the company’s growing profitability. Hypergrowth companies often reinvest cash flow into their businesses at the expense of continued customer acquisition. In this sense, Wall Street can give management a free hand if the company remains temporarily unprofitable. Palantir is challenging these dynamics. In 2025, the company generated $1.6 billion in net income and $2.3 billion in adjusted free cash flow.
The financial profile is solid, but it has barely scratched the surface of what it can achieve given its huge and expanding TAM.
When it comes to leading software-as-a-service (SaaS) companies, investors are valuing Palantir in a league of its own. The company’s price-to-sales (P/S) ratio of 103 is unparalleled compared to other industry peers, and it is expanding.
YCharts data.
Generally speaking, investors will place a premium on a company relative to its cohorts if it grows at a faster, more profitable rate. Palantir meets these requirements, but its rising valuation makes it increasingly polarizing in the eyes of analysts.
That said, smart investors understand that they have options. Given the volatility of growth stocks, going all-in on a company like Palantir is not a prudent move.
Instead, consistently purchasing stocks at different prices over the course of a long-term time horizon is an easy way to benefit from company advantages without requiring detailed analysis of every passing earnings report. This is a strategy known as dollar-cost averaging.
In my opinion, the company remains one of the most attractive opportunities in AI outside of the “Magnificent Seven.” Investors seeking exposure to category leaders beyond the usual suspects in Big Tech may consider building a position in Palantir Technologies as the company’s growth arc continues to take shape.
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Adam Spatacco has positions at Palantir Technologies. The Motley Fool has posts on and recommends Cloudflare, CrowdStrike, Datadog, MongoDB, Palantir Technologies, ServiceNow, and Snowflake. The Motley Fool has a disclosure policy.
Is Palantir a good stock to buy? was originally published by The Motley Fool
