Palantir: Buying The Dip Becomes More Reasonable

Palantir logo from Palantir’s website

Palantir Technologies (NASDAQ:PLTR) reported Q4’ 25 financials with figures topping even the most bullish market estimates. Quarterly revenue rose 70% to around $1.41 billion, beating estimates by 4.88%.

Both the U.S. Commercial and Government segments contributed meaningfully to this quarterly outperformance, with each segment bringing in $507 and $570 million, respectively. But what stood out the most was the U.S. Commercial segment’s 137% year-over-year growth, which also gave investors a bird’s eye view about how strong the demand is for Palantir’s commercial solutions.

With regards to it, the cost of revenue for the quarter stood relatively close to the Q4’ 25 figures, and this resulted in over 82% growth in gross profit, placing Palantir’s gross margins in the 85% neighborhood. And most importantly, this domino effect reached the company’s bottom-lines and set a record net income growth of nearly 700% to $611.6 billion, or $0.25 in diluted EPS — outpaced estimates by 8.60%

Palantir’s annual figures, on the other hand, are also impressive. Revenue rose 56% to $4.47 billion, while net income surged 249% to $1.63 billion, or $0.75 in diluted EPS, each beating estimates by 3.45% and 1.74%, respectively.

These figures represent a stellar business performance to any investor, but despite the momentum, PLTR is down around 9% since earnings release, and has largely been on a downward trajectory even before it, and until now — more about this in the next section.

A glance at Palantir’s stock profile

PLTR Chart from NASDAQ

Currently, PLTR trades at around $135 per share, and the long-term track record still looks pretty strong. A glance at Nasdaq’s PLTR chart shows just how volatile the stock has been, as well as the notable upward trend.

On a one-year lens, PLTR is currently up around 20%, and zooming out to five-year view lets us see over 365% gains, which means investors who have held their positions through the noise are still sitting on significant profits.

And when you look at what’s under the hood, Palantir’s most recent earnings show business fundamentals are holding up. No targets were missed, no downward revisions to guidance, and most importantly, no signs that the actual business is slowing down.

That is important to remember because real correction usually starts from the inside out, and there will be visible signs. Meaning, the company itself will show cracks before the stock price adjusts. As for Palantir, I believe we haven’t seen that yet.

Although PLTR has been relatively slow lately, It looks like what we’re seeing is a broad sell-off across the entire AI and SaaS market, and not a Palantir-specific problem. Take a look at how some of these prominent names have delivered over the past 6 months:

Even the megacaps like Microsoft (MSFT) and Meta (META) are getting dragged by the same macroeconomic fears whether all the massive spending for AI will actually translate into profits. So I think this is most likely a sector-wide mood swing rather than the market singling out Palantir.

But of course, I agree that conversation around valuation is fair and worth having. That’s because even at these relatively lower prices, Palantir still trades close to 120x forward earnings on a GAAP basis, and that figure is almost 315% above the sector median — the midpoint valuation for comparable companies.

So, is PLTR still overvalued?

On the surface, yes, that certainly looks expensive and traditional value investors would label Palantir as overvalued right off the bat.

However, I think standard valuation measures miss what makes Palantir valuable, and this is relatively common to other growth tech companies, and also why you can’t rely on these measures when valuing high-growth tech stocks.

In Palantir’s case, for example, it operates in a space where it has practically no legitimate competitors. Although BigBear.AI (BBAI), Snowflake (SNOW), and Databricks operate in related markets, it doesn’t seem like any of them can catch up to Palantir anytime soon.

At least for now, they simply don’t have what Palantir has built over the past two decades, which is an expansive network and a technology that’s valuable for both the government and the commercial sector. You could say, Palantir has a uniquely dominant market position compared to its peers.

Moreover, traditional metrics don’t really capture what’s ahead, such as the Total Contract Value (TCV) of a business, which means all the contracts the company has signed. In this case, Palantir’s TCV for Q4 ’25 reached $4.26 billion, and this number is up 138% year-over-year. These future revenues are yet to materialize and are not captured in forward price-to-sales or price-to-earnings calculations.

If you evaluated Meta or Amazon (AMZN) using the valuations during its early days, you would’ve missed the entire point. The point is that the same logic can be applied to Palantir’s current pace.

I think the real question is whether the price is justified by what the company has built so far and where it’s headed, and based on what I’ve seen from the company over the past 5 years, I believe it is.

Near-Term Growth Driver: The U.S. Commercial Flywheel

In the foreseeable future, I think the single most important thing to watch closely is what’s going on in Palantir’s U.S. Commercial segment. This is where enterprise adoption happens, and it’s growing at a pace rarely seen in enterprise software.

In the fourth-quarter, the segment contributed $507 million in revenue, which is up 137% year-over-year, and it’s not even slowing down despite the scale.

The growth rate went from 71% to 93% to 121% to 137% in the past 4 quarters. Usually, when revenue gets higher, growth naturally comes down, but it’s the opposite for this segment. The revenue is accelerating from a rising base.

What’s driving this accelerated growth is Palantir’s AIP, or Artificial Intelligence Platform — marketing team really went out on a limb with that name, didn’t they? Anyway, It’s a platform that lets companies integrate AI into their day-to-day operations to solve real operational problems. Well it’s not like putting a chatbot that everyone in the jobsite can use, but mostly for data analytics or operational efficiency improvements.

You get the idea. The point is, Palantir sells this platform integration through bootcamps, which is essentially a more comprehensive free trial. A company comes in, develops an operation-specific AI in a few days, and sees if it works in the intended environment — if it does, enterprises then sign a contract with Palantir, and these are mostly multi-year contracts.

Now, if you circle back to the previous section, you can see that Palantir’s TCV has grown 138% year-over-year. This bootcamp is largely what’s driving this TCV growth. During the Q4 earnings calls, management shared that a healthcare company completed two bootcamps last summer before signing a $96 million deal in 2025.

Then, an engineering service company ran a few demos and then signed an $80 million before Dec 2025. There’s more: a utility company expanded its contract from $7 million to $31 million annually in just a year, while an energy company expanded from $4 million to over $20 million contract over the same windows, all of which are full-scale enterprise adoption happening at a notable pace.

As for the most critical part, the U.S Commercial segment’s remaining deal value (RDV) has increased 145% to $4.38 billion at year-end. RDV is basically the contracted revenue that’s yet to reflect into the balance sheets. For investors, this means visibility into what’s coming.

For 2026, management is guiding commercial revenue to exceed $3.14 billion, or 115% growth from current levels. So, this segment alone would be larger than Palantri’s entire revenue in FY24, which was $2.87 billion, and this is why I think it’ll move to PLTR in the near-term.

If U.S. Commercial growth holds anywhere close to these rates through 1H26, it might trigger analysts to raise their PLTR estimates again. And when estimates go up, the stock price tends to follow.

What Could Today’s Entry Look Like in 3 to 5 Years?

Alright, at the end of the day, what we really want to know is “how much can we make in the long run if everything goes right?” I hear you. So let’s ground these numbers into a DFC model to see how much cash this business will generate over the next five years, and to see what is that worth today.

Starting with what we already know. Palantir closed FY2025 with $4.8 billion in revenue, which is good for a 56% increase year-over-year. And more importantly, the company generated $2.27 billion in adjusted free cashflow, or a 51% FCF margin for the entire year.

Basically, free cash flow is the money left after the business pays all what needs to be paid to keep all the gears moving. IMO, a 51% margin on that is elite-level. Only a handful of companies can hit that number at Palantir’s scale.

Moving forward to 2026, management guided a $7.19 billion revenue, or 61% year-over-year growth. CFO Dave Glazer said it straight:

“On the strength of our 2025 results, we are guiding a full year 2026 revenue of $7.190 billion at the midpoint, representing 61% growth year-over-year.”

Obviously, a 61% annual revenue growth can only last until it doesn’t, since keeping that pace would be harder as revenue grows. So to be realistic, I fade the growth down each year, say 40% in 2027 all the way to 18 by 2030 — there’s a table for this down below.

Moreover, I’ve also trimmed the FCF margin to 48% to account for spending on new products, and perhaps, international expansion. Today’s FCF is 51%, so there’s a slight haircut. And for the adjusted net margins, I started at 43% and let it expand gradually to 48%, assuming business scales up.

By the way, net margin is the percentage of revenue after getting rid of non-cash items like stock-based compensation (SBC). So, here’s how it looks like:

As you might’ve noticed, revenue growth fades from 61% down to 18% by 2030. I think this is already conservative relative to the current pace of Palantir, but it also respects the reality that trees don’t grow in the sky.

From these numbers, we can circle back into EPS. As the base, I’m using 2.55 billion diluted shares, and this accounts for SBC dilution and is also partially offset by the company’s active share buyback program. Here’s how it looks:

Take note, Palantir’s FY2026 adjusted EPS came in at $0.75, so our current model has that compounding to $3.55 by 2030, which is driven by revenue and margin expansion.

So with that in foundation, the question is what could PLTR actually trade at in 2030? The answer lies in the multiple. Today, PLTR trades at roughly 100x forward adjusted earnings, which is widely perceived as a premium. But assuming that the multiple compresses by 2030, or the market decides to bring that premium valuation down, PLTR would still be considered trading at a premium even at 50x to 75x forward P/E.

If you take the 2030 adjusted EPS of $3.55 and multiply it by the multiple. The numbers would look like this at different multiples:

I think 50 to 75x adjusted P/E is just fair for a premium software platform with double-digits growth rate, best-in-class margins, a wide government network in defense, and no direct competitor.

Looking at the table above, I believe a 60x adjusted P/E in 2030 is reasonable, because even at that point, Palantir would still be growing around 18% annually with free cash flow margins close to 48% and essentially zero debt.

And that base case puts the stock at roughly $213, or about 58% return by 2030 from today’s entry of $135. The bull case would be at 75x, which is still well-below today’s 100x levels. Even so, a 75x by 2030 would still land at $266, or almost double from here.

And most importantly, I’m not pulling these numbers from nothingness. Bank of America (BAC) has a $255 price target on Palantir, while Morgan Stanley’s (MS) bull case is $382 per share. My base case of $213 sits considerably closer to current levels than these two.

Also, our projection is grounded in management’s own guidance for 2026, and a steady slowdown from there. So, if growth holds above my assumptions (refer to the first table of this section), then the upside only gets bigger.

The other side of the coin: A much sooner multiple compression

But of course, there’s a risk to this model, and I don’t want to sugarcoat it. The closest one a multiple compression, or if the market decides to pay less for each dollar of Palantir’s earnings earlier than anticipated.

A compression typically occurs when growth disappoints. If that happens with Palantir, and the broader market continues to sell-off and investors re-rate Palantir to something like 50x forward earnings in 2026, PLTR could trade down to roughly $53 and $75 per share.

That would be a painful setback from current levels of $135 per share, and hitting the base target in 2030 would be a lot harder. So anyone buying here has to be comfortable sitting through that kind of volatility.

But anyway, a DFC model looks past the day-to-day noise, and solely focuses on the cash the business will potentially generate over time. And on that basis alone, the risk reward at $135 over a five year hold tilts notably in our favor.

Something that’s worth monitoring: Alex Karp’s $2.2 billion in PLTR sales

Now, before I wrap things up, I think everyone should be aware of this, even if it’s not a dealbreaker. Alex Karp has sold roughly $2.2 billion of PLTR stock over the past year. That includes about $1.95 billion sold across 2024 with roughly $1.4 billion of that coming during the presidential election windows, and an additional plan filed in early 2025 to sell up to 9.975 million shares through a 10b5–1 trading plan.

For starters, a 10b5–1 plan is basically a pre-schedule selling program. So the executives set the plan in advance, and the sales happen automatically on a fixed schedule without the CEO being involved in the decision real-time. So, these aren’t “panic sells” or insiders rushing to dump shares because they know something bad is coming. That’s not it.

Karp still holds about $920 million worth of PLTR stock as of the latest fillings, and board chairman Peter Thiel also planned to sell up to 2 million shares through March 2027. It’s pretty much a standard for executives whose net worth is heavily concentrated.

So, does this entirely eliminate the concern? Not exactly. For short-term investors, or should I say momentum traders, insider selling of this size can be a significant factor. It might feed the bearish sentiment and put additional pressure on a stock that already carries a premium valuation. Moreover, this gives more ammunition to bears like Michael Burry who argue that the stock is overextended.

For starters, Burry is a prominent analyst who disclosed put options worth over $912 million against Palantir and roughly $187 million against NVIDIA (NVDA) back in November 2025.

To me, I don’t consider this insert selling a red flag or some sort of warning for long-term holders. But again, if you’re trading PLTR on a 3 to 6 month timeline, Karp’s selling would likely pressure the price. For anyone with horizons more than 3 to 5 years, I don’t think this is something to panic about.

My Rating

So, here is where I come down to. I’m rating Palantir a Buy, because arguably, every bear case against Palantir is a macro-related argument, or to some degree, a valuation argument. There’s very little-to-no fundamental argument to be found around PLTRs relatively discounted price.

No one is saying AIP is weak, no customers are leaving, and the growth — anywhere in the company — is not slowing down. In my experience, when the market sells off a business like that because of broader sentiment, and not because the business actually messed up, that is an opportunity. A gift for long-term investors.