Is Palantir's 115x PS Ratio Sustainable? Lessons from Zoom and Snowflake's Valuation Rollercoaster

The tech sector's recent AI-driven surge has pushed Palantir Technologies' valuation to dizzying heights, with its Price-to-Sales (PS) ratio hitting 115x as of mid-2025. This multiple—far exceeding peers like Zoom (2.63x) and Snowflake (13.82x)—raises critical questions about whether this premium is justified. History shows that stocks with similarly sky-high PS ratios often face brutal corrections when growth slows or expectations reset. For investors, the warning signs are stark.

Historical Precedents: When High PS Ratios Crash

Zoom and Snowflake offer cautionary tales. During the pandemic, Zoom's PS ratio soared to 68.98x in late 2020, fueled by remote-work demand. By Q2 2025, its ratio had plummeted to 2.63x, reflecting investors' shift from speculative growth bets to valuing stable, predictable revenue. Similarly, Snowflake's PS ratio cratered from a peak of 101.85x in late 2021 to 13.82x by April 2025, even as its revenue grew 24% YoY in 2025. The lesson? Market sentiment shifts faster than revenue growth, and overvaluation begets brutal corrections.

Palantir's Case: Growth vs. Overvaluation

Palantir's 38-39% YoY revenue growth in 2025 is impressive, but its stock has surged 80% in H1 2025 alone, pushing its PS ratio to stratospheric levels. To justify this, revenue growth would need to accelerate exponentially, not just remain strong. Even if Palantir sustains 40% growth for years—a rare feat—the math demands revenue of $2.875B by 2027 (from $1.8B in 2025) to keep the PS ratio at 115x. Any slowdown, macroeconomic headwind, or shift in investor sentiment could trigger a collapse.

Why Overvaluation Matters Now

The AI hype cycle has inflated valuations across the sector. While Palantir's government and enterprise contracts are robust, its PS ratio is 8.5x higher than Snowflake's and 43.7x higher than Zoom's—peers in the same tech ecosystem. Historically, such gaps correct violently. For instance, Snowflake's 87% PS ratio drop from its peak to Q2 2025 occurred despite consistent revenue growth. If Palantir faces a similar reckoning, a 50% drop in its PS ratio (to 57.5x) would require its stock to fall 50%, even if revenue grows as expected.

Investment Strategy: Proceed with Caution

• Sell or Avoid: At 115x PS, Palantir's stock is a bet on perpetual hypergrowth. Investors should prioritize safer, undervalued peers like Snowflake or Microsoft (PS 10.8x), which offer comparable growth at a fraction of the risk.
• Wait for a Correction: Hold off on buying until the PS ratio drops to 30x–40x, aligning with its long-term growth trajectory and peer valuations.

Conclusion

Palantir's fundamentals are solid, but its valuation is a mirage. History shows that high-PS ratios, even for fast-growing firms, eventually revert to reality. Investors ignoring this lesson risk massive losses when the AI hype cycle cools. For now, the prudent move is to avoid the hype and wait for a correction—or sell while the speculative bubble still holds.

Final Note: Valuation discipline trumps growth alone. Palantir's 115x PS is a red flag—heed it.