Palantir (PLTR) Pre-earnings Analysis
In a rare change of sentiment, Palantir is seeing more bearish activity in recent months, leading its stock to trade below the 200 day moving average for the first time since April 2023. With the stock below this key level and 25% below its record highs, the question now is whether or not it’s worth buying in the new year.
Palantir is infamously known for their work in defense and with the U.S. government. In Q3 2025, U.S. government contract revenue grew 52% YoY, but that wasn’t the sole driver of growth. Commercial revenue grew 73% YoY, signaling successful enterprise expansion, something the company has targeted in recent years. Government contracts are good because they’re sticky and provide predictable cash flow, and enterprise customers can help amplify growth in the short - medium term.
Since Palantir is in the business of data analytics and decision making, they are at the forefront of the AI revolution. The company’s focus is helping enterprises and businesses organize data and make decisions that improve efficiency and the overall organization, which aligns perfectly with the premise of AI. This allows them to roll out these features to existing customers, which they’ve proven to have down so successfully. Palantir’s AI Platform (AIP) grew by 71% in commercial revenue last quarter, with total contract growing +232% YoY. These numbers are better than most other AI players right now…and notice, Palantir is not burning a ton of cash to get there.
As for the company’s valuation, even after the 25% drop on its stock, it’s still trading at frothy levels. Palantir trades at a price to earnings ratio of 355x and price to sales ratio of 100x, making it one of the most expensive valuations to buy into on the market. The likely reason behind such an enormous valuation is because the market believes that Palantir may be as important as a Oracle one day…that it is a company in its young stages, but has the potential to become a giant. In order to maintain such a standard, Palantir needs to continue posting massive wins and large, sticky contracts. They are doing just this, and doing so efficiently. Revenue, net income, balance sheet, and free cash flow are all growing significantly, but the bar is set high, especially as investors question valuations.
Palantir is considered a high value player in the industry and this discount on the stock is a compelling place to buy, but one should also note that the stock still trades at an extremely high valuation. Whether or not this is sustainable largely depends on the company’s continued success in landing contracts and delivering their solutions to both enterprise and commercial customers.
Option chain analysis:
Palantir’s options expiring on 02/06 currently have a 120% implied volatility reading, which translates to about a (+/-) $15 move from the stock. The direction will depend on earnings results.
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