Palantir Earnings: Triple-Digit Growth, but Does the Valuation Make Sense?

Key Morningstar Metrics for Palantir

• : $153.00
• : ★★★

• Morningstar Economic Moat Rating

  : Narrow

• Morningstar Uncertainty Rating

  : Very High

What We Thought of Palantir’s Earnings

Palantir PLTR shares are down slightly after reporting first-quarter results, which we suspect is due to a slight miss on US commercial revenue relative to expectations (FactSet). Still, the rule of 40—the sum of revenue growth and operating margin—reached 145%, yet another all-time high.

Why it matters: The key debate is not whether Palantir is a great company (it is; we rarely see this combo of growth and profitability), but rather if the valuation can make sense (it can, but things need to go well) and if frontier models represent a true competitive threat to Palantir’s ontology (it’s possible, but not probable).

• Aside from the small revenue miss in the US commercial segment, which can be explained by customer reclassification, the continuation of triple-digit growth and best-in-class customer retention is impressive. Still, the stock’s high expectations and uncertainty about competition have us waiting for a better entry.
• A comparative analysis of prior innovators and their distribution of long-term growth rates gives us confidence that Palantir is fairly valued, but we are paying close attention to efforts from artificial intelligence labs (for example, OpenAI’s DeployCo) that are attempting to copy Palantir’s deployment strategy.

The bottom line: We maintain our $153 fair value estimate for narrow-moat Palantir, as we balance an increasingly bullish revenue and margin forecast (raising our average annual growth over the next five years from 42% to 45%) with increased competition from AI labs, which we capture with a lower growth rate beyond 10 years (12% from 15%).

• The success of Palantir’s forward-deployed engineer strategy, integrating tightly with customers to reduce time to value, has attracted copycat strategies from AI labs, but we still think Palantir’s ontology stacks up well thanks to its governance layers and limitations on competitor context windows (expensive “working memory”).