Palantir Technologies, listed on NASDAQ as PLTR, began 2025 with significant growth, experiencing a surge of over 60% in its stock value within the first two months following a strong quarterly report released in early February. However, the stock has since retracted, falling 22% from its 52-week high on February 18. This decline is partly due to general negativity surrounding tech stocks, exacerbated by uncertainties related to tariffs and other policies anticipated to impact the U.S. economy. Additionally, the increasing risk of a recession in the U.S. may have prompted investors to secure profits from Palantir stock, which had previously seen substantial gains. The stock’s high valuation could also be a contributing factor to its recent pullback.
Despite these challenges, some investors may consider purchasing Palantir stock during its current market dip, as the company is positioned to exploit a significant growth opportunity over the next five years. Palantir’s fourth-quarter results for 2024, released on February 3, reported an annual revenue of $2.87 billion, reflecting a 29% increase year-over-year. Notably, revenue growth accelerated throughout the year, with a 36% increase in the final quarter. As a leading provider of artificial intelligence (AI) software platforms, Palantir is well-positioned for continued growth.
Various third-party estimates have ranked Palantir as the top vendor of AI software platforms. This positions the company to capitalize on a market projected to generate $153 billion in revenue by 2028, with an expected compound annual growth rate of nearly 41%. Consequently, the AI software platforms market could exceed $300 billion in revenue by the decade’s end. Palantir’s revenue pipeline is growing in alignment with this market’s forecasted growth, evidenced by a 40% year-over-year increase in its remaining deal value (RDV) to $5.43 billion in the previous quarter. This figure is nearly double its full-year revenue and surpasses the top-line growth reported for the entire year.
The significant growth in RDV is promising for Palantir investors, as it represents the total value of unfulfilled company contracts. Notably, RDV accelerated remarkably in the last quarter compared to a 22% year-over-year increase observed in the third quarter of 2024. The surge in contracts can be attributed to the popularity of Palantir’s Artificial Intelligence Platform (AIP), which allows customers to integrate generative AI solutions into their operations. AIP not only attracts new customers but also encourages existing ones to expand their use of Palantir’s generative AI platform due to its productivity-enhancing capabilities.
For example, Panasonic Energy North America has successfully expanded its use of AIP, creating a maintenance assistant that aids 350 technicians in producing 5.5 million batteries per day, which has resulted in reduced machine downtime, increased throughput, and quicker onboarding of new technicians. Management shared similar examples during a February earnings conference call, highlighting the productivity improvements AIP offers, which in turn have facilitated larger deals with existing customers. Productivity enhancements, a major driver of AI technology adoption, are expected to be a key factor in AIP’s growing popularity.
By 2030, market research firm IDC estimates that every dollar spent on AI-focused business solutions could yield $4.60 in value. Consequently, Palantir is likely to maintain strong growth over the next five years. With the AI software platforms market projected to grow by 41% through 2028, and based on IDC’s estimate that the market was valued at $28 billion in 2023, a 41% growth rate would have expanded the market size for AI software platforms to nearly $40 billion by now.
Assuming Palantir’s revenue in 2024 was entirely from sales of AI-related solutions, its market share would be just over 7%. If Palantir increases its market share to 10% by the end of the decade, the company’s revenue could rise significantly, potentially exceeding $30 billion (based on predictions that the market could reach at least $30 billion in revenue by 2030). Such growth would be more than ten times Palantir’s previous year’s revenue, likely prompting the stock market to respond favorably with sustained gains. Therefore, acquiring Palantir shares during market dips may be a sound strategy, considering the recent downturn may be temporary.
