TLDR

• Palantir (PLTR) stock is down 2% in 2025 but outperforming other software peers amid market volatility
• U.S. commercial revenue grew 64% year-over-year, while government revenue grew 45%
• The company has connections to the Trump administration through Peter Thiel and partners like David Sacks
• Potential Department of Defense budget cuts pose a risk, with DOD asked to reduce budget by 8% annually
• Palantir’s stock is considered expensive with a forward P/S multiple of 53, while Nvidia trades at a forward P/E of 24

Palantir Technologies has experienced a modest 2% decline in 2025, yet manages to outperform other software companies in a challenging market. The data analytics firm’s stock hit an all-time high of $125.41 on February 19 but has since retreated 40% from that peak.

By comparison, the broader software sector is struggling more severely. The iShares Expanded Tech-Software Sector ETF is down 19% this year. Major software players like Salesforce have dropped 28%, ServiceNow has fallen 32%, and Snowflake has declined 15%.

Palantir currently trades below its 50-day moving average, a technical indicator watched closely by investors. The company’s stock surged 340% in 2024, with much of that gain coming after Donald Trump’s presidential election victory.

Government Connections Fuel Growth

Several members of Trump’s administration have ties to Palantir, which was co-founded by venture capitalist Peter Thiel. David Sacks, appointed as White House artificial intelligence and crypto czar, is part of the so-called “PayPal Mafia” alongside Thiel and Elon Musk, a key Trump advisor.

The Financial Times has reported that Palantir benefits from a “revolving door” of executives moving between the company and high-level government positions in both the U.S. and U.K. This connection may explain the stock’s post-election rally, as investors anticipate AI playing a larger role in homeland security and defense.

In December, the federal government upgraded Palantir’s security rating for cloud computing services. The company also announced strategic partnerships with defense contractors Booz Allen Hamilton and L3Harris.

Recent deals include an AI partnership with Elon Musk’s xAI, which has built an AI training model called Grok. Palantir and startup Anthropic also announced a partnership with Amazon Web Services to provide U.S. intelligence agencies access to Claude 3 AI models.

Revenue Growth Accelerates

Palantir’s fourth quarter earnings impressed investors as CEO Alex Karp declared: “A software juggernaut has indeed emerged.”

U.S. commercial revenue grew 64% year-over-year to $214 million, while U.S. government revenue increased 45% to $343 million.

For 2025, Wall Street projects earnings per share of 53 cents, up 29%, with revenue growing 31% to $3.754 billion. This marks an acceleration from previous years when growth had been slowing. In 2022, revenue growth decelerated to 24% from 40% in 2021 and 47% in 2020. In 2023, revenue grew just 17% year-over-year to $2.23 billion.

Approximately 60% of Palantir’s revenue comes from government agencies. The company offers three platforms: Palantir Gotham for government agencies, Palantir Metropolis for financial services firms, and Palantir Foundry for corporate clients.

Budget Cuts and Valuation Concerns

A key concern for investors is potential Department of Defense budget cuts and Palantir’s exposure to U.S. Army contracts. Shares in IT government contractors recently tumbled after Secretary of Defense Pete Hegseth canceled some DOD contracts.

As part of the Department of Government Efficiency initiative, the Trump administration has asked the DOD to reduce its budget by 8% annually over the next five years. This represents a substantial cut that could impact numerous programs, though the specific effect on Palantir remains uncertain.

CEO Alex Karp has publicly stated support for these efficiency measures and hinted that the company could benefit. However, Karp and other company insiders have been selling Palantir stock, raising questions among investors.

On the technical side, Palantir boasts impressive metrics. The stock holds a Relative Strength Rating of 99 out of a possible 99 and a Composite Rating of 98 out of 99, according to IBD Stock Check-up.

Valuation concerns persist, however. Palantir’s stock trades at a forward price-to-sales multiple of 53, which is more than double the peak multiples that software-as-a-service stocks traded at in 2021 with similar growth rates. By comparison, Nvidia, another AI stock favorite, trades at a forward price-to-earnings ratio of around 24.

Despite valuation worries, Palantir continues to make progress with its “Artificial Intelligence Platform,” initially launched in early 2023. In March, the company hosted its sixth AI conference for customers, with several new companies participating.

Palantir has not disclosed pricing for its AI products, however. Some analysts say the company needs to show more revenue progress with generative AI commercial deployments. Wall Street analysts generally do not expect most software makers to monetize generative AI in a meaningful way until late 2025 or 2026.

For now, Palantir appears well-positioned in the AI space, particularly within government and defense sectors. But investors should keep an eye on valuation metrics and potential budget constraints in the coming quarters.