The artificial intelligence narrative has dominated Wall Street over the past two years, and for good reason. According to a report from Statista, the AI market is forecast to expand at a compounded annual growth rate of 27.7% between 2025 and 2030. This total addressable market for AI is forecast to grow from $243.7 billion in 2025 to $826.70 billion in 2030, making technology stocks in this disruptive space enticing bets right now. 

Earlier this week, investment bank Wedbush identified Palantir Technologies PLTR as a top pick for the AI revolution in 2025. Wedbush expects Palantir’s AI platform to gain traction among commercial customers in the U.S. over the next 18 months. It also projects AI spending to account for 10%-15% of IT budgets this year as AI-powered capital expenditures could surpass $2 trillion in the next three years. 

With a market cap of $269 billion, Palantir stock has surged over 365% in the last 12 months. But is PLTR stock a good buy right now? 

Palantir’s Strong Performance in Q4 2024

Palantir Technologies delivered exceptional performance in the fourth quarter of 2024, primarily due to the adoption of its artificial intelligence platform. In the December quarter, it reported impressive revenue growth of 36% year-over-year, with total sales reaching $828 million. For 2024, revenue grew 29% to $2.87 billion, showcasing strong momentum across its business segments.

Palantir’s U.S. operations were particularly strong, with overall revenue growing 52% year over year in Q4. The U.S. commercial segment was a standout performer, rising 64% year-over-year and 20% sequentially, while U.S. government revenue increased by 45%. This robust performance reflects Palantir’s successful positioning in the AI market, mainly through its Artificial Intelligence Platform (AIP) offering.

Palantir’s customer base expanded significantly, growing 43% year-over-year to 711 customers. Notably, it secured $1.8 billion in total contract value (TCV) during Q4, representing a 56% increase from the previous year. Additionally, it closed 32 deals worth $10 million or more, demonstrating strong enterprise adoption.

Palantir’s profitability metrics also improved, with its adjusted operating margin reaching a record 45% in Q4. It generated $517 million in adjusted free cash flow during the quarter, representing a 63% margin. The adjusted free cash flow for the full year was $1.25 billion, with a 44% margin.

Palantir provided strong guidance for 2025, projecting revenue of $3.75 billion, representing 31% year-over-year growth. The company expects U.S. commercial revenue to exceed $1.079 billion, maintaining a growth rate of at least 54%.

CEO Alex Karp emphasized that Palantir’s success stems from its long-term investment in ontology-based systems that enable organizations to implement AI and large language models (LLMs) effectively. While Palantir sees robust growth in the U.S. market, it noted slower adoption in European markets, which grew just 4% and accounted for 13% of its business.

Basically, Palantir remains focused on transforming AI capabilities into practical business applications through its AIP platform and Warp Speed manufacturing initiative. 

Is PLTR Stock Overvalued?

Wall Street expects Palantir to increase revenue from $2.87 billion in 2024 to $6 billion in 2027. Comparatively, adjusted earnings are forecast to expand from $0.41 in 2024 to $1 per share in 2027, while free cash flow is projected to grow from $1.25 billion to $2.6 billion. So, PLTR stock is really expensive, priced at 43.3x forward sales, 118x forward earnings, and 104x forward FCF. 

Out of the 18 analysts covering PLTR stock, two recommend “Strong Buy,” 10 recommend “Hold,” one recommends “Moderate Sell,” and six recommend “Strong Sell.” The average target price for the AI stock is $81.82, almost 30% below current levels. 

On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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