Palantir Technologies Inc. PLTR stock has had an incredible run over the past year. Shares have skyrocketed by an impressive 283%, outpacing the industry’s 58% growth.
PLTR stock’s consistent surge reflects optimism among investors eager to tap into the rapidly growing artificial intelligence (AI) market. Interest in AI stocks has been widespread, with significant gains seen across the sector. For instance, NVIDIA NVDA has gained 66%, International Business Machines IBM has climbed 42% and Oracle ORCL has gained 53% in the past year.
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Let’s see if PLTR still offers a buying opportunity even after such a massive rally.
PLTR's Growing Customer Base and Evolving Revenue Streams
Palantir caters to businesses seeking tailored AI/ML services, particularly attracting large government and corporate clients willing to invest heavily in its systems. The company boasts a customer base comprising some of the world's most prominent and influential organizations, reflecting the superiority of its technology. Furthermore, serving such high-caliber clients translates into premium-quality revenues for Palantir, suggesting a foundation for stable and predictable revenue growth in the years ahead.
Despite this, the company has recognized the need to broaden its customer base. It has adopted a modular sales approach, allowing clients to purchase specific product components instead of committing to the full platform upfront. This model also incorporates usage-based pricing, which lowers the entry barrier for new clients. By starting small, clients can gradually increase spending as they scale their usage of Palantir's solutions. Consequently, the company has significantly grown its U.S. commercial customer base.
We anticipate that as AI adoption expands within the private sector, the commercial segment will ultimately surpass the government segment in revenues.
PLTR’s AI Strategy Fuels Sector-Wide Growth
Palantir’s AI strategy is comprehensive, combining its proprietary Foundry and Gotham platforms with a solid plan to promote AI adoption across both government and commercial sectors. Its AI Platform (AIP) is the backbone of these capabilities, enabling organizations to process large datasets and derive real-time insights. This is especially valuable in sectors requiring extensive data integration, such as defense, healthcare, finance and intelligence, where operational efficiency and decision-making speed are critical.
In the government sector, Palantir is aligning its AI strategy with U.S. defense priorities. Its work on high-profile initiatives, such as the Department of Defense’s Open DAGIR project, underscores its role in modernizing military operations through AI-driven solutions. These initiatives enhance data interoperability and improve real-time decision-making capabilities, solidifying Palantir’s position as a key player in the defense sector.
In the commercial space, Palantir's AIP boot camps — providing hands-on experience to over 1,000 companies — have proven instrumental in customer acquisition. These boot camps not only showcase the platform’s capabilities but also demonstrate its adaptability across industries like logistics, manufacturing and supply chain management.
In the fourth quarter of 2024, Palantir’s U.S. government revenues grew 45% year over year, driven by strong demand for its AI-powered products. U.S. commercial revenues also surged 64%, fueled by the success of AIP. Additionally, the company reported a 78% year-over-year increase in operating income and an 1100-basis-point increase in adjusted operating margin, reflecting improved cost management and higher-margin government contracts.
PLTR’s Strong Balance Sheet
PLTR has a strong balance sheet. Cash and equivalents were $5.2 billion as of Dec. 31, 2024, against no debt. Hence, most of the cash is available for investments in growth initiatives. The solid cash reserve contributes to strong liquidity. At the end of the fourth quarter of 2024, PLTR reported a current ratio of 5.96, way above the industry's average of 2.21. A current ratio above 1 suggests that a company is well-positioned to meet its short-term obligations without difficulty.
Top and Bottom-Line Prospects Remain Robust
The Zacks Consensus Estimate for PLTR’s first-quarter 2025 earnings is pegged at 12 cents, indicating 50% growth from the year-ago level. Earnings in 2025 and 2026 are expected to increase 31.7% and 24.3%, respectively, from the prior-year actuals. The company’s sales are expected to gain 35.9% year over year in the first quarter of 2025. Sales are expected to rise 31.4% and 26.5% year over year, respectively, in 2025 and 2026.
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Upward estimate revisions reinforce this positive outlook. In the past 60 days, six estimates for first-quarter 2025 earnings have been revised upward, with no downward revisions, reflecting strong analyst confidence in the company. The Zacks Consensus Estimate for the quarter’s earnings has increased 9% during this period. For 2025 and 2026, eight and five estimates moved north in the same time frame, respectively, with no southward revision. The Zacks Consensus Estimate for earnings increased 12.5% for 2025 and 19.6% for 2026.
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Buy PLTR for AI-Driven Growth and Long-Term Potential
The stock presents a compelling buy opportunity, given the company’s leadership in the AI sector, robust financial performance, strong cash position and a positive earnings outlook. While it has already seen significant gains, the growing demand for AI solutions and continued government contracts suggest further upside potential. Investors looking to capitalize on AI-driven growth should consider adding Palantir to their portfolios.
PLTR currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
