Palantir Technologies (NASDAQ: PLTR) soared during most of this artificial intelligence (AI) boom, but one thing prompted caution at certain times, and that’s the stock’s valuation. It skyrocketed, reaching a peak of more than 240x forward earnings estimates last year. So, as investors became increasingly worried about the formation of an AI bubble several months ago, Palantir became one of the first AI stocks to suffer.
On top of that, concerns about whether AI demand would remain sustained circulated in the market — and that also weighed on appetite for Palantir stock. As a result, Palantir has declined about 19% since the start of the year.
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It’s important to remember, however, that during all of this, Palantir’s positive earnings story didn’t change: The company continued to report solid demand, and revenue and profit climbed. This wasn’t enough to meaningfully lift the stock — but here’s why the month of May could be a turning point.
Palantir’s growth so far
First, let’s start off by getting to know Palantir a bit better. The company has been around for more than 20 years, but it only launched on the stock market in 2020 — and its strong performance only happened as of 2024. Palantir develops software systems that help its customers make better use of their data, and for much of its history, the biggest client for this was the government. Today, governments remain massive customers, but another customer — one with the potential to drive incredible growth over time — has emerged. This is the commercial customer, and revenue from this business is soaring.
Why has this shift taken place in recent times? Because Palantir introduced a system, its Artificial Intelligence Platform (AIP), that incorporates the power of large language models into its data aggregation and analysis. And customers can quickly apply AI to their needs through AIP. As companies scramble to get in on AI, Palantir offers them this easy and powerful solution.
This success has been reflected in Palantir’s earnings reports quarter after quarter. In the latest, for example, the company reported a triple-digit increase in U.S. commercial revenue, a double-digit gain in U.S. government revenue, and it closed a record of more than $4.2 billion in total contract value. The company’s Rule of 40 score of 127% — a score of 40% is considered good — shows immense success when it comes to balancing growth and profit. Finally, increases in the number of U.S. commercial customers demonstrate momentum and room for growth. U.S. commercial customers topped 500 in the quarter, up from just a handful a few years ago.
