Palantir (NASDAQ:PLTR) shares sit near $123, down about 25% this year, and on paper that looks like a stock in trouble. It isn’t. The company delivered first quarter revenue of $1.63 billion, up 85% from a year earlier, and management responded by raising full year guidance to $7.65 billion to $7.66 billion, well above the prior forecast near $7.2 billion. Companies that are losing their edge don’t raise guidance like that. Companies executing ahead of plan do.
Photo by Arturo Añez on Unsplash
The Bull Case
The bull case starts with how sticky Palantir’s software actually is. Its Ontology layer links AI outputs to real assets and workflows, whether that’s a military unit tracking equipment or a manufacturer managing its supply chain, and that grounding cuts down on the kind of AI hallucinations that make executives hesitant to deploy the technology widely. Once a client is in, they tend to spend more.
Net revenue retention over the past year sits at 150%, meaning existing customers are increasing their spending by half, again as much as they did twelve months ago. Growth is also broadening rather than narrowing. US commercial revenue jumped 133% year over year, and US government revenue grew 84%, so this isn’t a story that depends on one customer type carrying the whole business.
The Risks
Now the honest part. Palantir is not cheap by any measure. The stock trades around 38 times forward sales and roughly 91 times forward earnings, multiples that assume years of fast growth are already locked in. Back in December, the price-to-sales multiple briefly touched about 118 times (on a trailing basis), the richest valuation ever recorded for a company of Palantir’s size. So, today’s numbers are actually a real step down, not a new high.
However, that didn’t stop a fresh wave of selling on July 22, when shares fell 6% in a single session after a developer posted a free, open-source intelligence-tracking tool called World Monitor on GitHub, positioned by some traders as a scrappy rival to Palantir’s paid platform. The same day brought separate scrutiny from the UK’s statistics regulator over how Palantir’s NHS data platform contract has reported its results.
Neither event changes Palantir’s revenue run rate, but together they remind you how little room a richly priced stock has to absorb bad headlines, and Michael Burry’s standing bet that shares could fall to $46 leans on exactly that fragility.
The Peer Check: Palantir vs. Snowflake
Snowflake (NYSE:SNOW) makes the natural comparison point here since both are AI-era data platform companies chasing almost the same enterprise customers, but the market has priced them in rather different ways. Hedge fund ownership moved in opposite directions last quarter: the number of hedge funds holding Palantir rose from 89 to 96 in Q1, while the number holding Snowflake (NYSE:SNOW) fell from 90 to 80. Short interest tells a similar story. Only about 3.64% of Palantir’s float is sold short, versus 6.65% for Snowflake, meaning the market is leaning more bearish on Snowflake even though it’s the cheaper stock on paper. And it is cheaper: Snowflake trades at a forward price-to-sales multiple of 15, a fraction of Palantir’s 38 times. Since Snowflake is also still unprofitable on a GAAP basis, its P/E isn’t a useful comparison. Smart money seems to be adding to the expensive, profitable name and trimming the cheaper, unprofitable one.
The Open Question
So, is Palantir worth paying up for today, given everything that’s still riding on the years ahead? Consensus estimates put 2026 EPS near $1.48 (almost double from a year ago) and 2027 EPS near $2.09. The forward P/E is expected to compress from around 91 times today to the low 60s next year as a result. That is the trade an investor is actually making here: paying up today on the bet that earnings keep growing at a fast clip for several more years, because if that growth ever stalls, there is no cheap valuation underneath to cushion the fall.
Second quarter earnings land August 3, and US commercial growth is the number that will settle this debate one way or the other. A slowdown in contract signings, cheaper open-source competition gaining real traction, or a broader rotation out of expensive software names could all pressure the stock further.
While we acknowledge the risk and potential of PLTR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PLTR and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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Disclosure: None.
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