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Palantir Technologies (PLTR -0.22%) made its debut on the stock market in September 2020. Since then, the company, which specializes in software platforms and data analytics, has seen its stock price surge by an impressive 714%. However, it is important to highlight that most of this growth occurred in the past two years following the introduction of its artificial intelligence (AI) software platform in April 2023.
Despite this remarkable growth, the stock has experienced a notable decline recently. While it began 2025 on a high note, reaching a peak on February 18, it has since fallen 38% from that 52-week high. This decline is largely attributed to broader market dynamics beyond Palantir’s control. The negative sentiment arising from the ongoing trade war, exacerbated by tariffs, has prompted investors to react cautiously.
In the current environment, the technology-heavy Nasdaq Composite has reported a decline of more than 20% in 2025 (as of this writing). Concerns regarding a potential economic slowdown and the threat of recession have led many investors to secure profits from high-performing stocks, including Palantir.
Nonetheless, this sharp fall in stock price may present an enticing opportunity for growth-focused investors. There are several factors likely to act as catalysts for Palantir’s future growth, positioning the company to experience a significant uptrend over the next decade.
Growing Demand for AI Software as a Growth Driver
Since the launch of its Artificial Intelligence Platform (AIP), Palantir has seen a notable improvement in its growth trajectory. This platform is designed for both commercial enterprises and government clients, assisting them in developing and deploying AI applications customized to their unique needs. The adoption of AIP has led to substantial productivity enhancements for its users, resulting in a notable expansion of Palantir’s customer base, along with increased spending from existing clients.
Specifically, during the fourth quarter of 2024, Palantir reported a year-over-year increase of 43% in its customer count. Moreover, there has been a surge in larger contracts, with a 25% increase in deals worth $1 million or more compared to the same timeframe last year. More significantly, contracts valued at over $5 million rose by an impressive 57% year-over-year.
These developments underscore Palantir’s strong performance in capitalizing on the rapid growth of the AI software market, which is projected to balloon to an astonishing $5.2 trillion in annual revenue by 2035, according to market research from Roots Analysis. This suggests that Palantir is just starting to tap into a vast market opportunity that could fuel continuous growth over the coming years.
Palantir has received accolades as the leading AI software platform vendor from several reputable market research entities, including IDC and Forrester. Such recognition contributes to the increasing influx of customers seeking Palantir’s AIP, which has proven to deliver both cost efficiency and enhanced operational effectiveness. In the fourth quarter of 2024, the company reported a 56% year-over-year increase in total contract value, reaching $1.8 billion.
This trend has significantly bolstered Palantir’s revenue pipeline, with a remarkable 40% year-over-year growth in the remaining deal value (RDV) to $5.4 billion, surpassing the 36% revenue growth achieved during the same quarter. Such metrics indicate that Palantir is well positioned for sustained growth, benefiting from both new customer acquisitions and enhanced spending from existing clients.
As Palantir expands its customer base and existing clients increase their investments in its offerings, it is likely to see improved unit economics. This measure of profitability reflects the earnings generated from each customer and suggests that Palantir’s capacity to secure larger contracts is an ongoing trend that could enhance its margin profile.
The company’s margins have notably increased in the recent past, indicating potential for further enhancements in this area.
PLTR Operating Margin (TTM) data by YCharts
Is Valuation a Concern at This Juncture?
One of the primary reasons for the recent profit-taking behavior among investors is Palantir’s high valuation. Stocks that trade at premium valuations often face heightened volatility during market downturns, as they are perceived as riskier when compared to value stocks. Currently, Palantir’s valuation stands at 66 times sales and 145 times forward earnings, despite a recent price correction.
Given the prevailing negative sentiment across global markets, it is plausible that Palantir’s stock could experience further downward pressure. However, if the share price continues to decline, creating opportunities to purchase the stock at a more affordable valuation, this could be an appealing prospect for investors, particularly considering the substantial growth potential within the AI software sector over the next decade.
It’s noteworthy that Palantir has begun to outpace the overall growth rate anticipated for the global AI software market. Roots Analysis projects a compound annual growth rate of nearly 31% for the generative AI software sector through 2035. With Palantir’s revenue growth currently at 36%, this trend indicates robust momentum.
As the AIP continues to deliver productivity improvements for its customers, Palantir is likely to maintain healthy growth levels over the next decade. As a result, investors may wish to monitor Palantir’s stock closely and consider accumulating shares during any further price declines, as this investment could yield significant returns in the long term.
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