Buy Palantir on Recent Softness Amid Massive Short-Term Price Upside

Artificial intelligence (AI)-powered data mining and analytics company Palantir Technologies Inc. PLTR has been witnessing a price downturn in the past six months despite reporting strong earnings results and operational performances.

PLTR is currently trading at a discount of 34.8% from its all-time high recorded on Nov. 3. This weakness in the stock price opened up a lucrative opportunity for investors to enter this AI analytics software giant, as it has massive short-term price upside potential. 

The chart below shows the price performance of PLTR year to date.

Attractive Diversified Business Model

In the last reported quarter, government revenues climbed 60.4% year over year to $730 million. Commercial revenues jumped 81.8% annually to reach $677 million. As of Dec. 31, the total customer count was 954. 

Palantir’s core customer base comprises businesses seeking tailored AI/ML services, particularly large government and corporate clients willing to invest heavily in its systems. This has generated solid revenues, registering a 21.3% CAGR from 2020 to 2024.

PLTR’s commercial business has gathered pace besides its traditional government contracts. This is primarily due to PLTR’s aggressive venture in the AI space. In 2023, PLTR launched its Artificial Intelligence Platform (“AIP”), an AI-powered system that helps customers quickly concentrate and analyze data and discover how it can help advance their business goals. 

AIP provides unified access to open-source, self-hosted, and commercial large language models (LLMs) that can transform structured and unstructured data into LLM-understandable objects and turn organizations' actions and processes into tools for humans and LLM-driven agents. This shift in revenue structure has enabled the company to no longer depend on government defense agencies. 

Extensive Thrust on AI

Palantir’s AI strategy is comprehensive, combining its proprietary Foundry and Gotham platforms with a solid plan to promote AI adoption across both government and commercial sectors. Its AIP is the backbone of these capabilities, enabling organizations to process large datasets and derive real-time insights. 

This is especially valuable in sectors requiring extensive data integration, such as defense, healthcare, finance and intelligence, where operational efficiency and decision-making speed are critical. 

In the government sector, PLTR is aligning its AI strategy with U.S. defense priorities. Its work in high-profile initiatives, such as the Department of Defense’s Open DAGIR project, highlights its ability to modernize military operations through AI-driven solutions where data interoperability and real-time decision-making capabilities are imperative. These capabilities solidify Palantir’s position as a key player in the defense sector. 

In the commercial space, PLTR’s AIP boot camps — providing hands-on experience to over 1,000 companies — have proven instrumental in customer acquisition. Boot camps showcase the platform’s capabilities and demonstrate its adaptability across logistics, manufacturing, and supply chain management. 

Guidance Signals Confidence, Not Caution

Management’s outlook for 2026 reinforced the strength of the current trajectory. First-quarter revenues are guided to $1.53 billion at the midpoint, implying 8.5% sequential growth. For the full year, Palantir expects revenues of roughly $7.19 billion at the midpoint, indicating 61% year-over-year growth.

Profitability is expected to remain exceptional. Adjusted operating income guidance of around $4.13 billion implies further margin expansion, while adjusted free cash flow is projected between $3.9 billion and $4.1 billion. The company also expects to maintain a Rule of 40 score near 118%, a level rarely achieved at this scale.

Future Catalysts

Palantir plans to invest more in hiring talent and advancing product features using its AI-powered technologies. This will enable the company to win and properly execute both government and commercial contracts. 

PLTR’s modular sales approach expands beyond the core customer base, allowing clients to purchase specific product components instead of committing to the full platform upfront. This model also incorporates usage-based pricing, which lowers the entry barrier for new clients. 

By starting small, clients can gradually increase spending as they scale their usage of PLTR’s solutions. This has expanded its U.S. commercial customer base. Aside from Palantir Technologies, BigBear.ai Holdings Inc. BBAI and C3.ai Inc. AI are the other major contenders in the AI-powered defense analytics software segment. 

Excellent Estimate Revisions

For 2026, the Zacks Consensus Estimate currently shows revenues of $7.22 billion, suggesting an improvement of 61.3% year over year and earnings per share of $1.34, indicating an increase of 78.7% year over year. The Zacks Consensus Estimate for current-year earnings has improved 28.8% over the last 30 days.

For 2027, the Zacks Consensus Estimate currently shows revenues of $10.11 billion, suggesting an improvement of 40% year over year and earnings per share of $1.89, indicating an increase of 40.7% year over year. The Zacks Consensus Estimate for current-year earnings has improved 36% over the last 30 days.

Moreover, PLTR has an impressive long-term growth potential. At present, the Zacks Consensus Estimate for PLTR’s earnings per share for long-term (3-5 years) has surged to 49.5% compared with just 16.3% growth for the broad-market index — the S&P 500. 

Massive Short-Term Price Upside

The short-term average price target of brokerage firms for the stock represents an increase of 48.2% from the last closing price of $135.24. The brokerage target price is currently in the range of $260-$90. This indicates a maximum upside of 92.3% and a downside of 33.3%. 

Investment Thesis

Palantir currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PLTR is set to capitalize on the AI boom with robust business execution and an industry-leading product portfolio. At this stage, each and every fall in the stock price will open a good entry point.

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

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