Palantir Technologies(NASDAQ: PLTR) has emerged as one of the most important companies in the artificial intelligence (AI) space. However, it’s also one of the most polarizing stocks in the market due to its high valuation.
That said, if the company can keep up its current growth trajectory, there’s a path to it becoming the next big mega-cap AI winner.
Palantir has been one of the best growth stories in AI. It just delivered its seventh consecutive quarter of accelerating revenue growth, with Q1 revenue up 39%. The company is seeing huge momentum, especially with U.S. commercial customers. Last quarter, U.S. commercial revenue surged 71%, and future deal value jumped 127%.
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While the stock is not cheap by traditional metrics, it’s positioned like few other companies to become the next big mega-cap tech name. While many firms are fighting to build the best AI model, Palantir is focused on creating an orchestration layer that actually puts these models to work. That’s where its opportunity lies and why investors have rushed to own the stock.
The company’s AI Platform (AIP) doesn’t just gather and analyze data; it organizes it into an “ontology” that it then directly maps to the real-world operations of a business. Its platform can then spot problems and recommend actionable solutions. It’s being used for everything from hospitals monitoring sepsis risk to enabling an energy giant to optimize its pipeline infrastructure to helping insurers streamline underwriting. Recently, Palantir has started rolling out AI agents that can carry out actions, not just suggest them. This could be its next big opportunity in the commercial space.
Meanwhile, the U.S. government remains Palantir’s largest customer, and this business is still growing at an impressive clip. U.S. government revenue rose 45% last quarter, and Palantir continues to expand its footprint with agencies like the Department of Defense (DoD). Even with the DoD facing budget cuts, Palantir looks like a winner due to the efficiencies its platform can create.
The company also recently won a major deal with NATO (North Atlantic Treaty Organization) for a custom version of its Maven Smart System. NATO’s move could open the door for further expansion into Europe as countries ramp defense spending and look to modernize operations. This could turn international governments into a third major growth driver alongside U.S. commercial and U.S. government.
Image source: Getty Images.
Make no mistake, Palantir’s stock isn’t cheap. The stock trades at a forward price-to-sales (P/S) multiple of 85 times based on 2025 analysts’ estimates and 66 times based on the 2026 consensus. We’re talking about revenue, not earnings, and as such, that’s expensive by any standard.
However, if Palantir can sustain its recent revenue growth, the stock can grow into its valuation over time. At a 40% annual growth rate, Palantir could reach $15 billion in revenue by 2029. That would drop the forward P/S multiple to around 22.5 in four years and close to 11 if it hits $30 billion by 2031. That scenario may seem aggressive, but with how fast adoption is moving, it’s not out of reach.
The reason why Palantir may be able to maintain this growth rate is just the sheer breadth of use cases emerging across its customer base. Palantir’s platform is being used to solve very different problems across vastly different industries. That’s just such a huge future opportunity for the company.
What’s also important is how quickly customers are moving from prototype work to full-scale deployment. Once clients complete early-stage testing, many are signing multiyear contracts and expanding usage rapidly. The company’s dollar retention continues to trend higher, and it’s not by accident. Palantir’s platform is sticky because once it’s embedded in an organization’s operations, it becomes central to how decisions get made.
In essence, AIP is becoming the operating system of AI. And it’s no coincidence that companies that control the operating systems of computers and smartphones — Microsoft, Apple, and Alphabet — have grown to be among the largest in the world.
The stock is not for the faint of heart, and I’d prefer to be a buyer at a lower valuation. However, for investors with a long-term view, it remains one of the most compelling names in the AI space.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, Microsoft, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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