TLDR:
- Palantir stock has pulled back 27% from February highs but remains up 17% for 2025
- The company converts 40% of revenue to free cash flow, an exceptional margin
- Revenue grew 29% in 2024 with management forecasting 31% growth for 2025
- Q4 2024 saw 43% year-over-year customer growth and 57% increase in large deals
- Palantir is positioned to compete in an AI software market projected to reach $5.2 trillion by 2035
In a tech market experiencing serious turbulence, Palantir Technologies (NASDAQ: PLTR) has shown surprising resilience. While the stock has retreated 27% from its February peak, it’s still posting a 17% gain for the year – quite the feat in 2025’s choppy markets.
The stock carries a premium price tag by traditional metrics. At 158 times forward earnings and 55 times sales, it’s certainly not cheap.
But these surface-level valuation metrics don’t tell the whole story.
Palantir’s financial foundation shows impressive strength where it matters most – cash generation. In 2024, the company produced $1.14 billion in free cash flow from $2.86 billion in revenue.
This translates to a 40% free cash flow margin, an impressive figure by any standard.
Most companies with such robust cash flow margins tend to be mature businesses with slow growth. Palantir breaks this mold completely.
Last year saw 29% revenue growth, and company leadership expects that pace to accelerate to 31% in 2025. Even more telling, Palantir has now delivered six consecutive quarters of growth acceleration.
AI Platform Driving Customer Acquisition
The launch of Palantir’s Artificial Intelligence Platform (AIP) in April 2023 marked a turning point for the company. This platform helps both government and commercial clients build and deploy customized AI applications for their specific needs.
Customer response has been nothing short of remarkable. Palantir reported a 43% year-over-year jump in customer count for Q4 2024.
But the company isn’t just adding new logos – existing customers are spending more too.
The number of deals worth $1 million or more increased 25% from the previous year. Even more impressive, deals valued at $5 million or more surged by 57%.
These metrics point to something very valuable in the software business: customers finding enough value to expand their usage over time.
Financial Health Indicators
Beyond immediate growth figures, Palantir’s future revenue pipeline looks strong. The company’s remaining deal value (RDV) – representing the total value of contracts yet to be fulfilled – grew 40% year-over-year in Q4 to reach $5.4 billion.
This growth rate outpaced Palantir’s quarterly revenue growth of 36%, suggesting momentum is building rather than slowing.
As a software business with improving scale, Palantir has seen its margin profile strengthen considerably.
The company’s unit economics – how much profit it generates per customer – continue to improve as existing clients expand their spending. This leads to earnings growing faster than revenue, a pattern investors love to see.
Long-Term Market Opportunity
The recent pullback in Palantir’s stock price has little to do with company performance. Rather, it reflects broader market concerns about tariffs, potential recession, and the unwinding of some tech sector enthusiasm.
The tech-heavy Nasdaq Composite has dropped over 20% so far in 2025, putting Palantir’s 17% year-to-date gain in perspective.
Looking beyond current market jitters, Palantir appears well-positioned for the long term. Research firm Roots Analysis projects the AI software market will grow to $5.2 trillion annually by 2035 – a massive opportunity that Palantir has only begun to tap.
The company’s market leadership is well-established. Multiple research organizations including IDC and Forrester have ranked Palantir as the top vendor in AI software platforms.
This leadership translates to business results. Palantir reported a 56% year-over-year increase in total contract value for Q4 2024, reaching $1.8 billion.
Customers appear increasingly convinced that Palantir’s solutions deliver real value through cost savings and efficiency improvements.
Weathering Market Storms
While Palantir stock could see more volatility if market conditions worsen, the company’s strong cash generation provides a buffer against economic headwinds.
The ability to generate $0.40 of free cash flow from every dollar of revenue gives Palantir flexibility that many high-growth tech companies lack.
For investors with a multi-year outlook, the current pullback might offer an entry point worth considering. Few companies combine Palantir’s growth rate, cash flow margins, and positioning in a massive expanding market.
The stock remains expensive by traditional metrics, but as the business continues to scale, these valuation concerns may fade into the background.
