Think Palantir's Blistering Growth Is Over? Think Again

One of the biggest questions among investors is what to make of artificial intelligence (AI). There are concerns about the slowing adoption of AI, the potential of a bubble, and whether the circular nature of some AI deals is "artificially" propping up demand.

With all that uncertainty as a backdrop, Palantir Technologies (NASDAQ: PLTR) reported its quarterly results after the market close on Monday, and to call the quarter a blowout might be an understatement. The AI and data mining specialist beat Wall Street's expectations across all key metrics and issued a bullish forecast for 2026.

Let's take a look at the results, what they suggest about the future, and whether any nagging doubts remain.

Image source: Getty Images.

A blowout

For its fourth quarter, Palantir delivered blockbuster results across the board. Record revenue of $1.4 billion jumped 70% year over year and 19% quarter over quarter, marking the 10th consecutive quarter of accelerating revenue growth. Spending discipline fueled robust adjusted earnings per share (EPS) of $0.25, which surged 79%.

The company easily surpassed Wall Street's expectations, with analysts' consensus estimates of $1.34 billion in revenue and $0.23 in EPS.

Yet as impressive as the numbers are, the devil's in the details, and the underlying metrics were even more eye-catching. U.S. government revenue jumped 66% year over year and 17% sequentially to $570 million. However, it was the U.S. commercial segment that did the heavy lifting, as revenue of $507 million surged 137% year over year and 28% sequentially.

Palantir closed a total of 180 deals worth at least $1 million during the quarter, including 84 worth $5 million and 61 worth $10 million. This helped the company close out the quarter with a record $4.26 billion in total contract value, up 138% year over year.

Equally impressive was Palantir's remaining performance obligation -- contractually obligated revenue that hasn't yet been recognized -- of $4.21 billion, which soared 143%. The company's net dollar retention rate, which measures additional spending by existing customers, hit 139%. Put another way, existing customers spent 39% more than in the same period last year, as users expanded their use of Palantir's AI tools.

Palantir's "rule of 40" score, a common measure of earnings quality for software-as-a-service companies, was in a class by itself, soaring to 127%. Any number above 40 indicates solid financial health.

Management is predicting the company's AI-driven growth streak will continue. For 2026, Palantir is guiding for revenue of $7.19 billion, or growth of 61%.

In the company's shareholder letter, CEO Alex Karp sought to explain the gulf between Palantir and other AI providers:

The large language models (LLMs) alone will not lead us to salvation. They require a means of reliably and efficiently interacting with the byzantine complexity of the modern enterprise -- its tangle of datasets and operations and personnel.

He goes on to say that AI models must be tethered to the real world, and that Palantir's software is the "tether."

A wall of worry

Palantir delivered revenue and profit figures that should put to rest any concerns about slowing AI demand. Moreover, Palantir isn't part of any of the circular deals that have investors worried. What remains are concerns about an AI-centric bubble and, in Palantir's case, the stock's lofty valuation.

And those concerns are understandable. In some quarters, Palantir has been called "the most expensive stock in history." A look at its multiple helps explain why. Heading into its earnings report, the stock was selling for 346 times earnings. Looking ahead, the numbers are slightly more palatable at 146 times forward earnings and 105 times next year's expected earnings. However, no matter how you slice it, the stock is pricey.

That said, some of the most successful companies in history have been expensive. In late 2012, Amazon boasted a price-to-earnings ratio of more than 3,600, fueled by heavy losses. Even before that spike, it had a multiple of over 300. Since then, Amazon stock has returned 1,840% -- despite its then-lofty valuation. This is not an apples-to-apples comparison, but it serves to illustrate that some of the best stocks in a generation were, at times, deemed too expensive.

To be clear, Palantir stock will not be appropriate for every investor. Those with a low threshold for volatility and value investors will balk. That said, a small position as part of a balanced portfolio might be a fit for risk-tolerant investors who plan to hold for the long term.

Danny Vena, CPA has positions in Amazon and Palantir Technologies. The Motley Fool has positions in and recommends Amazon and Palantir Technologies. The Motley Fool has a disclosure policy.