Palantir’s History of Blowouts Faces Highest Multiple on Wall St
Palantir Technologies (PLTR) has become a poster child for the paradox of growth stocks in 2025: its financial performance is extraordinary, yet its valuation is almost comically detached from reality. The company’s recent earnings reports have delivered blowout results, with revenue surging 36% year-over-year in Q4 2024 and a backlog of $5.4 billion in contracts. Yet investors are pricing the company at a forward P/E of 160x—a multiple so high it defies comparison to nearly every software peer. Is this a sign of Palantir’s generational potential, or a bubble waiting to pop?
Ask Aime: "Is Palantir's soaring valuation a sign of future success or a looming bubble?"
The answer lies in dissecting the company’s financial engine, its valuation metrics, and the risks lurking beneath its AI-driven growth.
The Blowouts: A Machine Built for Growth
Palantir’s recent results are undeniable. In Q4 2024, revenue hit $828.5 million, a 36% jump from the prior year, with both government and commercial segments firing on all cylinders. The U.S. Commercial segment, once a laggard, now grows at 64% annually, fueled by a 73% increase in customer count and a 99% rise in remaining deal value. Meanwhile, government revenue leapt 40% YoY—the fastest growth in 15 quarters—as it inked high-profile deals, including a $100 million contract with the U.S. military.
This momentum is reflected in its backlog: total remaining deal value rose 40% YoY to $5.4 billion, while remaining performance obligations (RPO) hit $1.73 billion. The company also posted a Rule of 40 score of 81% in Q4—combining 36% revenue growth and 45% operating margins—eclipsing peers like Microsoft (62%) and Salesforce (50%). With $5.2 billion in cash and no debt, palantir looks financially bulletproof.
The Valuation: A High-Wire Act
Yet the numbers underpinning Palantir’s valuation are staggering. Its forward Price/Earnings-to-Growth (PEG) ratio of 7.8x dwarfs the industry’s standards. For context, NVIDIA—a chip giant dominating the AI race—trades at a PEG of 1.1x. Palantir’s forward P/E of 160x is 6.8 times the sector median, and its enterprise value-to-next-twelve-months revenue (EV/NTM rev) stands at 46x—more than double its peers.
Analysts argue this premium is unsustainable. Even after a 15% contraction in its EV/NTM rev multiple this year (from 55x to 46x), the stock trades at a premium to its fundamentals. At a $203.5 billion market cap, Palantir’s valuation exceeds its 2025 revenue guidance of $3.75 billion by 54 times. For every dollar of free cash flow it generated in 2024 ($980 million), investors pay $208.
The Bear Case: Risks in the Shadows
Bears see three existential threats:
Valuation Compression: Over 76% of Wall Street analysts rate Palantir a “Hold” or “Sell,” with a consensus price target of $88.60—26% below its current $120 share price. Even bulls like Wedbush’s Dan Ives admit the stock could drop 20% if growth slows.
Insider Selling: CEO Alex Karp unloaded $2 billion worth of shares over five months in 2024, fueling investor skepticism. Other executives have also sold aggressively, raising questions about confidence in the stock’s long-term trajectory.
Defense Budget Uncertainty: With 40% of revenue tied to U.S. government contracts, Palantir faces headwinds from proposed DoD budget cuts of 8% over five years. A slowdown in military spending could crimp its fastest-growing segment.
The Bull Case: AI’s Unstoppable Force
Bulls counter that Palantir is the only company operationalizing AI at scale for institutions. Its platform, used by Fortune 500 firms and intelligence agencies alike, sits at the intersection of two megatrends: the $153 billion AI platform market (growing at 40% annually) and the global push to modernize government IT systems.
Palantir’s FedRAMP High certification—a gold standard for U.S. government cloud providers—gives it a moat in a sector where 80% of federal agencies still rely on legacy systems. CEO Karp’s vision of “operational AI” is resonating: in Q4, 92% of new commercial contracts came from Fortune 500 companies, a sign of enterprise trust.
Conclusion: Paying for the Future, or a Bubble?
Palantir’s valuation is a bet on its ability to dominate AI-driven analytics for decades. Its 30% revenue growth guidance for 2025, 45% operating margins, and $5.4 billion backlog suggest the company can keep delivering blowouts. But at 160x earnings, investors are already pricing in perfection.
The risks are clear. If DoD budgets shrink, if enterprise adoption stalls, or if competition intensifies, Palantir’s stock could crash. But if it continues to outperform—hitting its 2025 targets and expanding into new sectors like healthcare or energy—the sky-high multiple might look reasonable in hindsight.
For now, investors must decide: Is Palantir a generational opportunity, or a relic of the “Covid bubble” era? The answer will shape the next decade of its stock—and the future of AI itself.