Despite Palantir (PLTR) plunging 24% in the past five trading days, it has still soared 285% over the last 12 months. Why did this happen, and can it surge again like before?
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Table of Contents
Why Has Palantir Stock Been Volatile in 2025?
Palantir’s stock volatility in 2025 has been driven by a mix of company-specific developments, macroeconomic factors, and investor sentiment. Key factors include:
- Government Contract Risks: Concerns over potential U.S. defense spending reductions have created uncertainty around Palantir’s reliance on government contracts. This risk was amplified by news suggesting possible budget constraints affecting U.S. defense agencies.
- CEO’s Share Sale: CEO Alex Karp’s plan to sell up to $1.2 billion worth of shares has raised questions about insider confidence, contributing to stock fluctuations.
- Macroeconomic and Market Factors: Broader market volatility due to potential tariff war, recession fears, and sector rotation between growth and value stocks have amplified Palantir’s price swings.
How Was Palantir’s Earnings and Outlook in 2025?
Palantir’s earnings in 2025 have shown solid growth, particularly in the U.S. market:
- Revenue Growth: In Q4 2024, total revenue increased 36% YoY, with U.S. revenue reaching $558 million. The company issued a revenue growth guidance of 31% YoY for FY 2025, signaling confidence in sustained expansion.
- Profitability: Palantir achieved a GAAP net income of $79 million in Q4 2024, representing a 10% profit margin. This suggests improved efficiency but still reflects significant investments in AI and commercial expansion.
- Outlook: The company remains optimistic about AI-driven commercial growth and product scalability, but execution risks, especially in commercial adoption, remain.
What Are Palantir’s Coming Challenges and Opportunities?
Challenges:
- Dependence on Government Contracts: While government revenue remains strong, any shifts in U.S. defense budgets or political changes could disrupt Palantir’s financial stability.
- Commercial Sector Competition: Palantir faces increasing competition from cloud giants like AWS and Microsoft, as well as AI & data analytics competitors like Snowflake, Databricks. Scaling its Foundry platform in enterprise sectors will be crucial.
- Regulatory Risks: Expanding globally comes with challenges, including compliance with new data privacy laws like the EU AI Act, which could affect operations in international markets.
- Expensive valuation: trading at about 200 times future earnings, raises concerns about sustainability. Also, on February 18, Palantir hit 3.8 standard deviations (STDEV) in the PE Band, an extremely high level. After pulling back 34%, it now stands at 2.1 STDEV, which remains elevated. For comparison, 2 STDEV was the peak just before the end of last year (see the red circle in the chart below).
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Opportunities:
- AI Leadership & AIP (Artificial Intelligence Platform): Palantir’s AI-driven solutions have the potential to dominate sectors like healthcare (drug discovery) and logistics (supply chain optimization).
- Commercial Expansion: Palantir’s commercial growth, particularly in manufacturing, energy, and financial services, presents a major opportunity to diversify its revenue streams beyond government contracts.
- International Market Growth: Expanding into the Asia-Pacific and emerging markets with tailored data solutions could drive long-term growth.
Can Palantir Have Substantial Growth as Before?
Palantir’s growth potential remains strong but likely more moderated than in its earlier years. While it continues to expand in both government and commercial sectors, the stock’s ability to sustain high growth depends on:
- Successful commercial scaling and enterprise adoption.
- Continued AI innovation, particularly in generative AI and automation.
- Strategic acquisitions or partnerships that accelerate product expansion.
- Broader market correction will likely hinder its stock growth.
- Despite a 34% pullback, it is still trading above the 50-day moving average at $85, which could serve as a support level.
