This Growth Stock Continues to Crush the Market

Palantir Technologies (NASDAQ: PLTR) has crushed the S&P 500 each of the past three years. This began in 2023, when the growth stock generated an over 167% return, only to follow it up in 2024 with an eye-popping 340% gain. Its momentum didn't fade in 2025, as the stock more than doubled yet again, advancing 135%.

Meanwhile, Citigroup analyst Tyler Radke sees the good times continuing to roll in 2026. He recently upgraded the stock to a buy and placed a $235 price target on it.

The analyst said discussions with CIOs (chief information officers) lead him to believe that Palantir's commercial revenue will only continue to accelerate as budgets and use cases increase, while government revenue could be about to take off, as the U.S. government views modernization as a top priority. Radke believes this will lead the company to continue to beat analyst revenue and earnings estimates and for them to continue to be significantly revised higher.

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A growth machine

Palantir's strong stock performance can be directly tied to its accelerating revenue growth, which has improved every quarter since the second quarter of 2023. During that span, its year-over-year quarterly revenue growth has gone from just 13% in 2023 to 63% last quarter.

The biggest driver of Palantir's success has been with U.S. commercial customers, which coincides with the introduction of its Artificial Intelligence Platform (AIP). The company started out primarily as a government defense contractor, whose Gotham platform was able to gather and analyze data from a large collection of sources and help uncover potential threats. It later brought its data-gathering and analytical expertise to the commercial sector with its Foundry solution, but it wasn't until it paired it with AIP to act as an orchestration layer that it really took off.

One of the biggest issues with artificial intelligence (AI) is that it can hallucinate and just make stuff up. However, having a single source of truth for data can greatly mitigate this issue and make AI more useful in real-world settings.

Foundry AIP can gather data from a variety of sources and organize it into an ontology that links the data to its real-world counterparts, whether that be a physical object or a process. With this clean, organized data, customers can then use the large language model (LLM) of their choosing to provide actionable insights based on their data to help solve problems without the worry of AI hallucinations.

As the orchestration layer needed to implement AI solutions, Foundry AIP has become a hit in the U.S. commercial space. Last quarter, Palantir's U.S. commercial revenue surged 121% to $397 million, with growth coming from both new and existing customers. The company's Bootcamp sale model, where it would help organizations build AI-driven tools based on their data in just five days, has shortened its sale cycle and rapidly drawn in new customers.

This could be seen in the 45% increase in customer count that Palantir saw last quarter. Meanwhile, existing customers are also expanding rapidly as they continue to find new use cases. In Q3, the company's U.S. commercial total contract value skyrocketed 342%, while its net revenue retention was a robust 134%.

The company has also been seeing strong growth with its largest customer, the U.S. government, as the Trump administration continues its modernization push for defense and intelligence agencies. Last quarter, its U.S. government revenue jumped 52% to $486 million. It also saw strong international government revenue growth, with revenue rising 66% to $147 million.

Is the stock still a buy?

AIP's position as an AI operating system and the breadth of use cases for which it can be applied set up Palantir to be a huge AI winner over the long term. However, with the stock trading at a forward price-to-sales multiple of 49 times and a forward price-to-earnings ratio of 126 times, the stock is expensive. If growth can continue to accelerate, it could grow into these multiples, but I'd prefer to be a buyer on a pullback.

The largest companies in the world -- Nvidia, Alphabet, and Apple -- have all seen big drawdowns throughout their histories. So, even if Palantir eventually becomes one of the biggest companies in the world, the path likely won't be straight up. As such, I'd look for a dip in the stock before diving in.

Citigroup is an advertising partner of Motley Fool Money. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.