As Palantir Aims for 61% Revenue Growth by 2026, Should You Buy Palantir Stock?

Palantir ( PLTR ) recently posted Q4 2025 results that beat analysts’ estimates. Revenue grew 70% to $1.41 billion, while adjusted EPS came in at $0.25 versus expectations of $0.23. Annual revenue totaled $4.48 billion, and management expected 2026 revenue to be $7.19 billion, up 61% year-over-year (YOY). That’s nearly $1 billion more than the consensus previously set.

As expected, shares of PLTR rose on the report, but that didn’t last long. Shares are down 3% over the past five days, and the reaction tells you everything about where Palantir stands in the market’s imagination. Stocks are loved for their fundamentals and feared for their valuation.

Should you chase the run and buy the stock at a discount, or is the PLTR falling further? Let’s take a look at what happened.

US commercial revenue rose 137% year-over-year in the fourth quarter to $507 million, while total US revenue grew 93% year-over-year to $1.08 billion. For the full year, US trade revenue more than doubled, rising 109% to $1.47 billion. What makes these numbers truly remarkable is the customer behavior underneath. Palantir’s customer count increased 34% year over year to 954.

Not only that, the company closed $4.26 billion in contracts in the fourth quarter alone, up 138% year over year. Existing customers quadruple and quintuple their commitments. This shows that once Palantir gets its foot in the door, it can start taking over operations at both businesses and government institutions very quickly. It’s a win-win for both Palantir and its customers, with a shipbuilder cutting its planning time from 160 hours to 10 minutes. A boost like this offsets sticky customer relationships and opens the door to new deals.

In addition, adjusted free cash flow for the fourth quarter reached $791 million with a margin of 56%. For the full year, the metric hit $2.27 billion with a margin of 51%. These numbers are truly incredible, even for a software company.

Palantir’s valuation is mostly where things start to go wrong. The company has an impeccable track record, but Wall Street is no longer willing to pay a massive premium for it. This may have a lot to do with the broader market going into a “de-risking” mode by dumping speculative assets and piling into safer ones.

Take a look at the S&P 500 Software and Services Select Industry Index (XSW), for example.

A business like Palantir won’t buck the trend this time because the stock was already overdue for a correction. If anything, the sale to Palantir is a healthy reset that will allow the fundamentals to catch up with the sky-high valuation.

Although shares of PLTR are down 31% from their 52-week high, they remain uncomfortably expensive. PLTR stock trades at 123 times forward earnings and roughly 90 times next year’s earnings. Palantir management tends to lower estimates, so you might assume you’re paying a little less than that, but these numbers remain above the norm.

Remember, the rest of the software sector is taking a dive, and investors are paying just 24 times earnings for stocks like Nvidia (NVDA). Comparing Palantir’s valuation to last year looks cheap, but it’s still exceptionally high compared to its historical valuation and peers. Savvy investors will note that investors are becoming more discerning as the novelty of AI wears off. You should no longer expect Palantir to trade at a premium in 2025.

Analyst sentiment remains genuinely divided. And for the first time, Wall Street has done the exact opposite of what it would have done after such an earnings hit.

In my opinion, investors should take some time to digest these ominous signs and only accumulate software stocks that are trading at a bargain. If the sector continues to bleed, the floor is much lower for PLTR stock.

Compare that to something like Microsoft (MSFT) and you’ll notice that the herd will increase buying pressure the moment it falls below 20x forward earnings. PLTR stock will have to drop even further before anyone calls it a bargain.

As of the date of publication, Omor Ibne Ehsan had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com

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