TLDR:
- Palantir stock is up 17% YTD despite pulling back 27% from February highs
- The company generates impressive $0.40 in free cash flow for every $1 in sales
- Revenue increased 29% last year with projected 31% growth this year
- Customer count rose 43% year-over-year in Q4 2024
- Palantir’s AI software platform positions it to capture part of a potential $5.2 trillion market by 2035
Palantir Technologies (PLTR) has maintained relative resilience during recent market turbulence, with shares up 17% year to date despite retreating 27% from the all-time high reached in February. While conventional valuation metrics might suggest the stock is expensive, a closer look at the company’s financials reveals why investors remain bullish on this AI software provider.
The stock currently trades at 158 times this year’s expected earnings and 55 times expected sales. These figures might raise eyebrows among value investors.
But there’s more to the story than these traditional metrics suggest.
For 2024, Palantir generated an impressive $1.14 billion in free cash flow on revenue of $2.86 billion. This translates to $0.40 in free cash flow for every dollar of sales – a margin that would be enviable even for mature, slow-growth businesses.
What makes this even more remarkable is that Palantir is not a slow-growth company.
Revenue increased 29% last year, and management projects growth will accelerate to 31% this year at the midpoint of guidance. The company has now posted six straight quarters of accelerating revenue growth.
Customer Growth Fueling Expansion
Palantir’s growth trajectory took a sharp upward turn following the launch of its Artificial Intelligence Platform (AIP) in April 2023. This platform, designed for both commercial and government customers, helps clients build and deploy AI applications tailored to their specific operations.
The results have been striking. Palantir registered a 43% year-over-year increase in its customer count in Q4 2024.
Even more telling is the increase in larger deals. The number of contracts worth $1 million or more rose 25% from the previous year, while deals exceeding $5 million jumped by 57%.
These figures demonstrate that Palantir isn’t just acquiring new customers – existing clients are expanding their spending with the company.
Impressive Financial Momentum
The company’s strong customer acquisition and expansion metrics have translated directly to its bottom line. Palantir reported a 40% year-over-year increase in its remaining deal value (RDV) in Q4 to $5.4 billion.
This key metric, which represents the total remaining value of contracts to be fulfilled, grew faster than the company’s 36% revenue growth in the same quarter.
This suggests Palantir is setting itself up for even stronger growth in the future.
The financial picture gets better when examining the company’s margin profile. As a software business with improving unit economics, Palantir has been able to grow earnings faster than revenue.
Its operating margin has improved considerably over the past couple of years, with room for further expansion as the company scales.
Market Opportunity and Future Potential
The recent pullback in Palantir stock came primarily due to factors outside the company’s control. Global market volatility triggered by tariff concerns and recession fears has particularly impacted high-growth tech stocks.
The tech-heavy Nasdaq Composite has dropped more than 20% in 2025 so far.
Despite this short-term volatility, Palantir appears well-positioned for long-term growth. Market research provider Roots Analysis projects the AI software market to reach $5.2 trillion in annual revenue by 2035, suggesting Palantir is still in the early stages of tapping a massive opportunity.
It’s worth noting that multiple research agencies including IDC and Forrester have ranked Palantir as the top vendor of AI software platforms. This market leadership helps explain why customers continue flocking to the company’s AIP offering.
The platform has delivered measurable cost and efficiency gains for clients, leading to a 56% year-over-year increase in total contract value in Q4 2024, reaching $1.8 billion.
Palantir’s strong free cash flow margin will help it weather any trade war or other macroeconomic risks while continuing to invest in growth. For investors with a long-term horizon, the recent pullback might represent an opportunity to consider a company that’s positioning itself at the forefront of the AI software revolution.
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