Is purchasing stock in Palantir Technologies a sound investment decision?
Palantir Technologies, a company specializing in turning raw data into competitive advantage for critical organizations, has been making waves in the tech industry. With a current market price around $160, Morningstar's fair value estimate of $115 suggests that the current prices may price in outcomes beyond their bull-case scenario.
The company, known for its unique ability to clean data, identify hidden relationships, and deploy machine-learning algorithms that generate actionable insights, has seen impressive growth. Palantir's Q2 2025 revenue hit $1 billion for the first time, representing a 48% year-over-year growth. The average Palantir customer spends over $1 million quarterly on the platform, indicating its indispensable nature.
Palantir's implementations touch every aspect of operations, from supply-chain optimization to threat assessment. One notable example is Tampa General Hospital, which reduced patient length of stay by 30% using Palantir's systems.
However, Palantir's high valuation and outsized margins put pressure on its ability to sustain these levels long term. Big Tech incumbents like Alphabet and Microsoft have the distribution and resources to develop rival frameworks. The commoditization of large language models could further lower barriers to entry, allowing new competitors to challenge Palantir's current technological edge.
Competitors like Amazon Web Services, Snowflake, and ServiceNow do not offer the complete ontology framework that makes data truly intelligent, making Palantir an essential platform for many of its customers. Companies competing with Palantir Technologies in AI monetization and having the resources to develop potentially competitive products include OpenAI, Databricks, IBM, C3.ai, and SAS. Databricks is seen as Palantir's biggest competitor outside the hyperscalers due to its strong growth and SaaS model, while IBM, C3.ai, and SAS are established American competitors with some technological rivalry. OpenAI is also a significant emerging competitor in the AI space.
The high switching costs associated with Palantir make it difficult for competitors to breach its customer base. GAAP operating margins reached 27% in Q2, with adjusted operating margins hitting 46%, moving Palantir closer to sustained profitability after years of operating losses. This is reflected in the "Rule of 40" metric for Palantir Technologies, which reached 94%, a high figure in the software industry.
Morningstar analysts project 40% annual growth for Palantir through 2030, requiring revenue to climb from $4.2 billion today to $21 billion by the end of the decade. This bull-case scenario, capturing 3% of a $1.6 trillion total addressable market, could justify $280 per share, but this assumes Salesforce-level dominance in a market that may not materialize at that scale.
Investing in Palantir requires believing that the AI revolution will unfold even more dramatically than current hype suggests and that Palantir will capture an outsized share of the resulting value, making it a high-risk venture bet, not a core holding. The company's role in the capture of Osama bin Laden serves as a testament to its potential impact.
In the world of big data and AI, Palantir Technologies stands out as a company that transforms raw data into actionable insights, driving growth and profitability for critical organizations. As the tech landscape continues to evolve, Palantir's position as a key player remains uncertain, with both opportunities and challenges on the horizon.
