Wall Street thinks the party for Palantir can continue even after a wild rally in 2025 — but there's one key risk
The stock is already up by about 113% this year as it heads into its second-quarter earnings report after the bell on Monday, but analysts see reasons to believe the gains can pile up further.
The Alex Karp -led software giant is benefiting from a slew of government contracts, roaring AI demand, and a cultlike following among retail investors in 2025.
Shares of the company have soared from around $75 a share at the start of 2025 to above $160 on Monday. That ascent has made Palantir the best-performing stock in the S&P 500 this year.
Analysts are bullish about Palantir's second-quarter earnings. They estimate the tech giant will report $939.3 million in revenue for the three-month period, up around 38% year over year.
Here are some of the reasons they see the growth story continuing — and one key risk.
1. The AI trade is still running hot
Palantir will likely keep up growth in its commercial segment, thanks to the ongoing hype surrounding AI. Accelerating AI adoption is creating a greater need to integrate data, which is good news for the stock, analysts at Mizuho wrote in a note.
The bank said it conducted checks on Palantir's enterprise inbound activity, which gave it confidence that the company would be able to beat its commercial growth guidance in 2025. Palantir expects the US commercial side of its business to grow 68% for the year.
"PLTR's recent execution and momentum is stunning, including material upward revisions across its commercial and government segments that we very much underestimated," Mizuho analysts wrote.
Analysts at UBS said they also conducted checks on Palantir's enterprise businesses, and lifted their estimates for the company's revenue growth from 31% to 38% for the year.
"We see potential tailwinds from the increasing adoption of AI across enterprise," Citi analysts wrote, adding that its checks and its conversation with Palantir's chief finance officer were also positive.
Government contracts
A large part of Palantir's growth story has been fueled by its contracts with the federal government.
In April, the software company secured a $30 million deal with the US Immigration and Customs Enforcement for software to monitor visas and track deportations.
In May, the firm teamed up with Fannie Mae, and said it would provide AI tools to support the government-sponsored mortgage financier's Crime Detection Unit.
It also secured a $795 million contract with the Department of Defense's AI arm, and last week, locked a deal to help streamline the US Army for up to $10 billion for the next decade. The deal consolidates 75 existing contracts into a single agreement.
"We believe this deal represents an additional tailwind for PLTR with AI initiatives across the US government accelerating with AI a strategic focus on the federal front and Palantir in the sweet spot to benefit from a tidal wave of federal spending on AI," analysts at Wedbush Securities wrote last week, calling Palantir one of the top tech stocks to own in 2025.
"We remain positive on the public sector pipeline, which appears durable given ongoing geopolitical instability. Net, we believe PLTR will likely be able to continue growing its Government revenue >40% Y/Y over at least the near-term," Mizuho said.
"We continue to view Palantir as well positioned to continue to deliver best-in-class growth given the secular trend towards enterprise AI adoption; the continued push for efficiency and technology adoption in the US government; and adoption of Operation Warp Speed among new defense entrants, traditional defense companies, and the broader manufacturing industry," analyst at Goldman Sachs wrote in a note following Palantir's first-quarter earnings report in May.
High bar
But there's one risk Wall Street is eyeing: the valuation is at eye-watering levels. As of Monday afternoon, the trailing 12-month price-to-earnings ratio was above 690x.
Despite a bullish short-term outlook, Goldman Sachs, UBS, and Mizuho are among those on Wall Street who rated Palantir as "neutral" headed into its second-quarter earnings. Analysts at Citi, meanwhile, rated the stock as "Neutral/High Risk."
"We maintain our Neutral/High Risk rating on the stock on valuation concerns and our view that second derivative/revision trends could moderate limiting upside," Citi added in a note.
"That said, we are equally stunned by the multiple that PLTR has attained, which places its valuation dramatically above anything else in software," Mizuho analysts said, adding they would "continue to worry" that the stock could see a reversion sometime in the next several quarters.
"We continue to be very impressed by the fundamental story (we have been since our launch) but valuation remains our key hurdle, we remain Neutral rated," UBS said.
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