Palantir Technologies(NASDAQ: PLTR) has been the single best-performing stock in the S&P 500 not just this year, but last year as well. The artificial intelligence (AI) leader more than doubled in 2025 through mid-August, on top of a stunning 340% gain in 2024. That kind of back-to-back performance is almost unheard of, and it’s no accident.
The company is growing at a blistering pace, landing massive new contracts and rapidly expanding the reach of its Artificial Intelligence Platform (AIP). With momentum this strong, it’s worth looking at exactly what’s driving the surge, what could slow it down, and why the long-term opportunity remains enormous.
Palantir made a name for itself in the years after 9/11, providing advanced data analytics to U.S. intelligence agencies. It built a reputation for solving complex, high-stakes problems, with the government using it to fight terrorism and later track COVID cases. The U.S. federal government remains Palantir’s largest customer, but its biggest growth engine is now the commercial sector.
Palantir’s secret sauce is AIP. The solution collects data from a multitude of sources, organizes it into what it calls an “ontology,” and connects it to real-world assets and processes. This gives AI models the clean source of data they need to help solve real-world problems.
Palantir is not building large language models (LLMs), instead it is providing the system that gives organizations the tools to make AI actually work. In essence, AIP is like an AI operating system.
Palantir’s results speak for themselves. The company has seen its revenue growth accelerate for eight straight quarters.
In Q2, its revenue soared 48% year over year to $1 billion. U.S. commercial revenue jumped 93% to $306 million, with customer count up 43% from a year ago. Remaining deal value in that segment more than doubled to $2.79 billion, showing just how quickly adoption is growing. Existing customers are also expanding quickly, with net dollar retention climbing to 128%. (Any number north of 100% means a company saw growth from existing customers, net of any churn.)
The government side is equally strong. U.S. government revenue surged 53% to $426 million in Q2, and Palantir landed a 10-year, $10 billion Army contract consolidating 75 agreements into one. International government sales grew 37%.
Image source: Getty Images.
No stock is risk-free, and the most obvious risk for Palantir is its valuation. The stock trades at a forward price-to-sales (P/S) ratio of nearly triple digits, and its price-to-earnings (P/E) multiple is nearing 275. Even if the stock were cut in half, it would still be far from cheap.
That means expectations for the stock are sky high, and any slowdown in growth or hiccup in execution could send shares tumbling. International commercial adoption remains a weak spot, with revenue in that segment down slightly last quarter, so the company still has work to do in proving it can scale globally outside its government and U.S. commercial strongholds. And while the company hasn’t felt an impact from U.S. government spending cuts, other defense contractors have, so it is still something to at least keep an eye on.
Despite those risks, Palantir’s opportunity is hard to ignore. AIP appears to be a game-changing platform for Palantir, capable of providing real-world analysis across seemingly any industry. The breadth of use cases for AIP is just incredible; it’s being used for everything from monitoring sepsis at hospitals to helping insurance companies with their underwriting to helping companies with their supply chains.
Many customers are still in the early stages of deployment, which means the opportunity for increased usage and more use cases within these customers is a huge opportunity. The company is also rolling out AI agents that can take even more direct action and handle specific automated tasks, which could further increase the platform’s stickiness and impact. And with European commercial markets largely untapped, Palantir has another major growth lever.
Palantir’s stock is pricey, although great companies rarely trade at bargain prices. If it can maintain its AI leadership position and continue expanding its reach, the stock has the potential to be one of the defining AI investments of the next decade.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
