Key Points
-
Palantir has fallen about 36% from its high, dragged down by a broad AI sell-off.
-
Revenue grew 85% year over year in the first quarter — its fastest ever.
-
Even after the drop, the stock trades at more than 80 times forward earnings.
- 10 stocks we like better than Palantir Technologies ›
A 36% drop naturally raises the question: Is Palantir (NASDAQ: PLTR) finally cheap? With this stock, the honest answer is no — even now.
Shares trade near $132 as of this writing, about 36% below their all-time high of $207.52.
But this comes at a time when the business is firing on all cylinders. In fact, Pantir’s revenue growth rate has been accelerating in recent quarters. Even more, profits are soaring.
So what gives? And is this a buying opportunity?
Elite growth, and real profits
There is plenty going right. Palantir’s first-quarter revenue rose 85% year over year to $1.63 billion, the fastest growth in the company’s history as a public firm.
That wasn’t a one-off, either. Growth has accelerated for several quarters as demand for its AI software has taken off across both government and corporate customers.
The U.S. commercial business, the core of the bull case, grew even faster, jumping 133% to $595 million. Total U.S. revenue more than doubled. Palantir’s story is no longer just a government one, and that diversification is exactly what supporters wanted to see.
And this isn’t growth bought at the expense of profit. Palantir’s net income was $871 million in the quarter, a 53% net margin, while non-GAAP (adjusted) free cash flow reached $925 million and adjusted operating margin hit 60%.
Few software companies at this scale grow this fast while throwing off this much cash. Management raised its outlook, too, guiding for full-year 2026 revenue of about $7.65 billion, roughly 71% growth over 2025. Put simply, this is one of the fastest-growing large software companies around, and it’s already highly profitable, which is a rare combination.
So the business, clearly, isn’t the problem. If anything, it keeps outrunning expectations.
The problem is still the price
The trouble is what you have to pay for that growth.
Even after a 36% decline, Palantir carries a market capitalization above $300 billion. Against trailing revenue of about $5 billion, that is roughly 60 times sales, a multiple arguably no company grows into comfortably.
The earnings picture is just as stretched. The stock trades at about 85 times its expected earnings over the next year. The broader market, by comparison, sits in the low-to-mid 20s.
To put that premium in context, Palantir traded closer to 200 times forward earnings at its peak. So the stock is only “cheaper” relative to an extreme starting point, not against any normal yardstick.
Even giving Palantir full credit for its growth, that is an enormous multiple. To justify it, the company has to keep compounding at extraordinary rates for years, and do it without the deceleration that eventually catches every fast grower.
There are already faint hints of that gravity. The first quarter’s 85% growth was dazzling, but guidance implies a step-down to about 71% for the full year. The bigger Palantir gets, too, the harder each additional point of growth becomes.
It’s worth remembering how much of the recent decline is simply valuation coming back down rather than anything wrong with the company. That is what makes a richly priced stock so unforgiving. The same valuation multiple that powered the run works just as hard in reverse when sentiment turns, which is exactly what happened this week.
This is where a great company and a great stock part ways. Palantir could keep executing beautifully and still deliver mediocre returns, simply because the entry price is so high.
So is the drawdown a buying opportunity?
I don’t think so, not yet. I would happily own a business growing 85% at these margins. But at about 85 times forward earnings, the stock still prices in near-flawless execution for years, and a 36% discount from an extreme high doesn’t change that math much. What would might my mind is a materially lower price, or a few more quarters of 80%-plus growth that let the business grow into its multiple. Until then, I’m content to admire it from the sidelines.
Should you buy stock in Palantir Technologies right now?
Before you buy stock in Palantir Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $407,651!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,252,823!*
Now, it’s worth noting Stock Advisor’s total average return is 922% — a market-crushing outperformance compared to 208% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
