Palantir's Soaring Revenue and Profitability Defy Valuation Concerns

In the first quarter of 2025, Palantir delivered impressive financial results, with revenue up 39% year-over-year and 7% sequentially to $884 million. This growth was primarily driven by the company's strong performance in the U.S. commercial segment, where revenue soared 71% to $255 million. The U.S. government segment also contributed, with a 45% increase in revenue to $373 million.

Palantir's so-called "Rule of 40" score, which measures the balance between revenue growth and profitability, reached a healthy 83% in the quarter. This metric has increased significantly from just 38% less than two years ago, highlighting the quality of the company's profits.

A key factor behind Palantir's success is its Artificial Intelligence Platform (AIP), which helps customers aggregate data from multiple systems and apply AI-powered algorithms to drive data-driven decision-making. The company's boot camps, where developers work alongside Palantir engineers to address real-world business problems, have also proven effective, with many customers signing seven-figure deals shortly after completing these workshops.

While Palantir's stock valuation remains a concern, with the company trading at 679 times earnings and 156 times sales, the company's strong execution and growth potential have attracted the attention of some Wall Street analysts. Wedbush's Dan Ives, for example, believes Palantir could reach a $1 trillion market cap by 2028, driven by double-digit year-over-year growth for much of the next decade.