Palantir Technologies (PLTR) has been one of 2025’s standout performers, soaring more than 160% year-to-date and over 340% in the past 12 months. Yet, this explosive rally has driven its valuation to unsustainably high levels, leaving investors with minimal margin for error.
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While Palantir continues to benefit from the AI boom and its data analytics platforms are gaining traction across both enterprise and government sectors, the risk/reward balance now appears heavily tilted to the downside. In my view, much of the company’s AI leadership and brand strength is already fully reflected in the stock price.
With earnings figures set to be published next week, the entire market is watching PLTR like a canary in the coal mine—a test case for whether investors will continue to reward AI optimism without the backing of equally explosive fundamental growth, or if the stock’s lofty valuation will finally meet the gravity of financial reality.
High Bar Set for Q3
Palantir (PLTR) is scheduled to report Q3 2025 earnings on Monday, November 3, with consensus estimates calling for $0.17 EPS on $1.09 billion in revenue. Over the past year, analysts have raised EPS forecasts by 54% and revenue projections by 29%, reflecting a surge in optimism from both Wall Street and retail investors.
Despite this upbeat sentiment, I believe expectations may be set too high, creating a setup that looks vulnerable to disappointment. Palantir has only missed earnings once in the past 12 quarters, but the current bar appears ambitious. My base case anticipates a modest sequential increase in total contract value (TCV) alongside a slowdown in year-over-year growth, largely due to softening commercial demand.
I expect government revenue to rise roughly 50% year-over-year, slightly ahead of consensus estimates at 48%. However, investor focus may shift toward the potential impact of U.S. budget uncertainty and the lingering effects of the federal government shutdown on Q4 contract execution.
On the commercial front, the picture remains mixed. Channel checks indicate higher client churn and a slower pace of new AI Platform (AIP) deployments. While management will likely emphasize long-term AI opportunities and the company’s expanding role in AI-driven decision systems, I remain cautious about near-term monetization trends and the sustainability of Palantir’s current growth premium.
Commercial Growth Appears Unsustainable
Much of Palantir’s commercial acceleration over the past two years came from one-off catalysts, including SPAC partnerships, joint ventures in Japan, and catch-up revenue recognition from prior deals. As these tailwinds fade, I see normalized commercial growth settling closer to 15%, versus the 25%-plus trajectory implied by current market expectations.
Competition in the enterprise data and AI space has also intensified dramatically. Rivals such as Microsoft (Fabric) (MSFT), Databricks, and Snowflake now offer scalable data management and AI deployment solutions at competitive price points, pressuring Palantir’s ability to win large, incremental deals.
Furthermore, Palantir’s consultative business model—which relies on bespoke solutions and deep technical involvement—limits its total addressable market. This approach works well with governments and large, complex organizations, but doesn’t scale efficiently to smaller enterprises with in-house technical talent.
PLTR’s Government Growth Engine Starts to Slow
The government segment remains Palantir’s strongest pillar, but even here, growth is decelerating. Contract values have shown only modest expansion over recent quarters, and deal flow has become lumpier as public sector budgets tighten.
While the company continues to secure renewals and extensions, new contract wins have been more measured than in prior years. Until Palantir demonstrates renewed acceleration in government business, I believe the stock’s valuation will remain challenging to justify.
Retail Investor Frenzy Adds Volatility
Palantir’s shareholder base remains heavily retail-driven, with many investors deeply committed to the company’s long-term AI vision. However, sentiment is beginning to show signs of strain. Recent retail data shows an 18% quarter-over-quarter increase in discussions about privacy and ethical concerns, suggesting that enthusiasm is being tempered by growing scrutiny.
At the same time, frustration is mounting over the lack of capital return initiatives, despite Palantir’s mighty $6 billion cash position. The company has yet to outline any clear plans for share buybacks or dividends, and continued silence on this front could further erode confidence. When combined with ongoing ethical debates and speculative chatter about a potential stock split, these pressures could drive valuation multiple compression in the coming quarters as investors reassess the balance between promise and execution.
PLTR Retains Sky-High Valuation
By virtually any metric, Palantir’s valuation looks extreme. The stock trades at a P/E of 358x, compared to the sector median of 25x. Its EV/Sales of 129x and Price/Sales of 128x are more than 30x higher than industry averages. While Palantir boasts a stellar five-year revenue CAGR of 30% and a five-year free cash flow CAGR of over 100%, the pace of growth simply doesn’t justify the current multiples.
Even accounting for Palantir’s AI-driven optionality and potential margin expansion, the company would need to deliver several years of uninterrupted 30%-plus growth to warrant its present valuation. That’s a tall order in today’s competitive landscape.
Using a blend of eight valuation models—including EV/EBIT multiples, five-year DCF EBITDA Exit, and Price/Sales comparisons—I arrive at a fair value estimate of roughly $90 per share, implying ~54% downside from current levels.
Is PLTR a Good Stock to Buy?
While Wall Street is not as bearish as I am, most analysts still expect downside from current levels. According to TipRanks, Palantir carries an average Hold rating, based on 19 analyst reviews: 4 Buys, 13 Holds, and 2 Sells. The average price target is $158.41, implying ~20% downside over the next 12 months.
Long-Term Remains Intact as Short-Term Downside Risks Dominate
Palantir remains a fascinating long-term story with meaningful exposure to AI adoption, national security digitization, and enterprise analytics. However, the company’s current valuation already reflects near-perfect execution and multi-year growth that may not materialize as quickly as bulls hope. Commercial momentum looks unsustainable, government growth is decelerating, and rising retail speculation has inflated the stock’s multiple well beyond reasonable fair value.
While I believe Palantir could ultimately deliver on its long-term AI vision, I see significant downside risk over the next 12 months. For now, I maintain a Bearish stance on Palantir.