With a meteoric rise in its share price, a growing client base, and a reputation for powering some of the world’s most critical government and commercial operations, Palantir is on the radar for investors seeking exposure to the next wave of artificial intelligence. But does the stock justify its hefty valuation? Here’s a comprehensive look at Palantir for investors, including reasons to buy, sell, or hold.

Understanding Palantir’s Business Model

Palantir generates revenue through three primary channels:

1. Software Subscriptions: Cloud-hosted (Palantir Cloud) and on-premises solutions.

2. Operational & Maintenance Services: Ongoing services for deployed platforms.

3. Professional Services: Custom integrations, training, and support.

In 2024, Palantir’s revenue soared 29% to $2.87 billion, fuelled by strong demand for its AI Platform (AIP) and robust government contracts. Government work contributed $1.2 billion, while commercial revenue reached $1.0 billion, with U.S. commercial sales up 54% year-over-year.

Core Platforms & Differentiation

• Gotham: Used by defence and intelligence agencies for mission planning, logistics, and data analysis (clients include the U.S. Department of Defense and NATO).

• Foundry: A commercial platform enabling enterprises to operationalise AI/ML models.

• AIP (Artificial Intelligence Platform): Launched in 2023, AIP enhances decision-making for clients like Walgreens and is recognised as a market leader by Forrester.

What sets Palantir apart?

• Scalability: Clients often expand usage across operations, increasing software value.

• Security: Defence-grade data protocols and compliance.

• Vertical Expertise: Deep integration in government, healthcare, and finance.

Financial Performance & Valuation

• 2024 Growth: Revenue up 29%, net income up 75% (non-GAAP), and 711 clients (+43% YoY).

• Stock Performance: Shares surged 340% in 2024 and are up 57% YTD in 2025, with a market cap of $ 200 B.

• Valuation: Trading at a PEG ratio >8 and 491x trailing earnings, well above sector averages. The median analyst price target is $96 (about 20% below the current price of $120).

Growth Catalysts & Risks

Opportunities

• Defence Expansion: Multi-year U.S. Army contract ($ 600 M+) and increased European military spending.

• AI Leadership: AIP is a recognised leader, targeting a $153B AI platform market growing at 40% annually.

• Commercial Penetration: U.S. commercial revenue now 45% of total, with clients spending 20% more on average.

Risks

• Overreliance on Government: 55% of revenue comes from government contracts, which can be volatile.

• Valuation Sensitivity: High multiples leave little margin for error.

• Regulatory Scrutiny: Expansion may face hurdles due to data-privacy laws.

Leadership & Strategic Vision

CEO Alex Karp emphasizes Palantir’s alignment with Western defense priorities, contrasting with Silicon Valley’s consumer focus. The company’s recent book, The Technological Republic, advocates for closer collaboration between tech and government to address modern security challenges.

Should You Buy, Sell, or Hold Palantir?

Here’s a breakdown of key reasons investors might consider buying, selling, or holding Palantir stock:

Reasons to Buy

• Explosive Growth: Six consecutive quarters of accelerating revenue, 36% YoY surge, and 75% increase in net income.

• Market Leadership: AIP is outpacing offerings from Google and Microsoft.

• Expanding Customer Base: 43% customer increase, with higher average spend.

• Massive Addressable Market: AI platform market expected to reach $153B by 2028; Palantir’s TAM could hit $1.4T by 2033.

• Durable Moat: High switching costs, proprietary frameworks, and deep client integration.

Reasons to Sell

• Valuation Risk: PEG ratio above 8, P/E over 265, and a share price 20% above consensus analyst targets.

• Rising Competition: Lower AI costs and convergence of large language models could erode Palantir’s advantage.

• Governance Concerns: Dual-class shares give insiders significant control.

• Limited Global Reach: Focus on Western clients may cap growth versus more global peers.

Reasons to Hold

• Sustained Momentum: Strong financials and customer growth, with positive analyst outlook.

• AI Upside Optionality: Early innings in commercial AI adoption, with room for further expansion.

• Sticky Clients: High switching costs and deep integration support stable recurring revenue.

• Potential for Future Rerating: Continued execution could justify the premium valuation over time.

Summary Table

Conclusion

With sticky contracts and scalable software, Palantir is a dominant force at the intersection of AI, data analytics, and national security. While the company’s growth is impressive and its market opportunity vast, its premium valuation and reliance on government contracts introduce significant risks. Investors should carefully weigh their risk tolerance, investment horizon, and confidence in Palantir’s ability to maintain its competitive edge before deciding.