Palantir Stock Surges 121% in a Year: Is the Rally Still Investable?

Palantir Technologies PLTR has emerged as one of the strongest-performing enterprise software and artificial intelligence stocks over the past year, delivering an increase of more than 120% and dramatically outperforming its broader industry.

While the stock has seen a modest pullback in recent months, this appears to be a healthy consolidation rather than a deterioration in fundamentals. A closer look at Palantir’s technology, financial execution, and growth trajectory suggests that the long-term investment case remains firmly intact.

Unlike many AI-focused companies racing to build ever-larger models, Palantir occupies a differentiated and defensible position. The company focuses on enabling organizations to deploy AI at scale within real operational environments, making it a critical infrastructure provider rather than a speculative technology vendor.

PLTR’s Artificial Intelligence Platform

At the heart of Palantir’s strategy is its Artificial Intelligence Platform, which allows organizations to structure, integrate, and govern complex datasets so AI systems can operate effectively. Enterprises typically struggle with fragmented data across finance, operations, supply chains and human resources. PLTR solves this problem using an ontology-based architecture that creates a digital twin of an organization’s operations.

This design enables AI to interact directly with business workflows rather than producing disconnected insights. As a result, Palantir is positioned on the demand side of the AI economy, where monetization depends on execution and outcomes rather than raw computing power. This distinction is increasingly important as enterprises shift from AI experimentation to production-scale deployments.

Foundry Driving Explosive Commercial Growth

Foundry has become Palantir’s primary growth engine in the commercial market. The platform integrates data from ERP systems, IoT sensors and enterprise databases using more than 200 prebuilt connectors. Automated, low-code pipelines allow companies to unify structured and unstructured data quickly, while embedded analytics and machine learning tools support use cases such as supply chain optimization, fraud detection and predictive maintenance.

The commercial momentum behind Foundry is accelerating rapidly. In the most recent quarter, Palantir’s U.S. commercial revenues surged 121% year over year, highlighting growing enterprise demand for operational AI solutions. Overall, U.S. revenues rose 77% year over year, significantly outpacing international growth and reinforcing the strength of the domestic market.

Customer expansion is also deepening. Palantir closed more than 200 deals exceeding $1 million in value during the quarter, including dozens of contracts above $5 million and $10 million. This reflects not only new customer wins but also broader adoption across existing clients. The August release of Foundry DevOps further strengthens the platform by simplifying application deployment and lifecycle management, reducing friction for enterprise users.

Gotham Provides Stability and Strategic Credibility

While Foundry fuels commercial expansion, Gotham remains a cornerstone of Palantir’s business. Gotham is designed for mission-critical intelligence applications, integrating massive datasets in real time and applying AI-driven analytics to identify threats, detect anomalies and enhance situational awareness.

Gotham’s continued adoption by government and defense agencies provides Palantir with long-term revenue stability and exceptionally high switching costs. These relationships also enhance Palantir’s credibility with commercial customers, particularly in regulated industries such as healthcare, finance and energy. Few companies can successfully serve both public-sector intelligence agencies and large enterprises, giving Palantir a unique competitive advantage.

Together, Foundry and Gotham form a dual-platform strategy that balances high-growth commercial opportunities with durable public-sector contracts.

Strong Financial Performance and Expanding Margins

Palantir’s recent financial performance underscores the scalability of its software model. In the third quarter of 2025, total revenues increased 63% year over year, driven primarily by U.S. commercial demand. The company achieved an adjusted operating margin of 51%, its highest level to date, reflecting strong operating leverage and disciplined cost management.

Profitability is also improving on a GAAP basis. Operating income reached $393 million, while net income rose to $476 million. Earnings per share increased more than 100% year over year, demonstrating that Palantir’s growth is translating into bottom-line results rather than being consumed by rising expenses.

The balance sheet further strengthens the investment case. Palantir ended the quarter with approximately $6.4 billion in cash and equivalents and no debt, providing substantial flexibility to invest in innovation, pursue strategic initiatives and withstand macroeconomic uncertainty.

Return on Equity Reflects Long-Term Strategy

Palantir currently generates a return on equity of roughly 28%, slightly below the industry average of 33% but still indicative of strong capital efficiency. Importantly, this metric reflects management’s deliberate decision to prioritize platform expansion and long-term scale over short-term optimization.

As investments in product development and customer deployment mature, operating leverage is expected to increase further, providing a pathway for return on equity expansion. For long-term investors, today’s ROE represents a foundation rather than a ceiling.

Earnings Outlook and Analyst Support

Earnings expectations for Palantir remain highly favorable. The consensus estimate indicates strong year-over-year earnings growth for both the current quarter and the next two fiscal years, supported by accelerating commercial adoption and expanding margins.

The Zacks Consensus Estimate for Palantir’s fourth-quarter 2025 earnings stands at 23 cents per share, suggesting 64.3% year-over-year growth. For 2025 and 2026, earnings are projected to rise 78% and 43%, respectively, compared to prior-year figures. Sales are also expected to see robust growth, increasing 62.8% in the fourth quarter of 2025, with full-year sales projected to rise 54% in 2025 and 41% in 2026.

PLTR, NVDA and AI: The Trio Leading AI Revolution

Palantir is riding the broader AI surge with peers like NVIDIA NVDA and C3.ai AI. NVIDIA is the undisputed backbone of AI infrastructure, continues to see insatiable demand for its GPUs, while C3.ai is expanding its enterprise footprint. While PLTR excels in deployment, NVIDIA powers the backend and C3.ai tackles the front-end application layer. For investors bullish on PLTR, NVDA’s dominance and C3.ai’s evolving strategy remain worth watching as this transformative tech cycle unfolds.

Conclusion

Palantir stands out as a rare combination of rapid growth, improving profitability, and strategic relevance in the enterprise AI landscape. With Foundry driving explosive commercial expansion, Gotham anchoring long-term stability, and a debt-free balance sheet supporting continued investment, the company is well positioned for sustained value creation. While near-term volatility is possible following a strong rally, Palantir’s fundamentals continue to strengthen. For investors seeking exposure to scalable, mission-critical AI infrastructure, Palantir remains a buy with a compelling long-term outlook.

PLTR stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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