July 2025 Update: Execution Running Hot; but Valuation Limits Remain
Palantir continues to deliver across both government and commercial fronts, reinforcing its strategic position and deepening its moat.
Government Momentum
- Awarded a $217.8M contract from the U.S. Space Force to modernize its Command & Control platform .
- Won a $795M Maven Smart System deal with the U.S. Army, selected to deepen partnerships with ICE via a $30M ImmigrationOS initiative Axios+1Financial Times+1
- NATO adopted its AI-enabled Maven battlefield system for alliance-wide operational analysis.
These contracts demonstrate confidence from security-sensitive institutions and highlight Palantir’s capability to execute complex, mission-critical software at scale. With a supportive U.S. administration and cofounder Peter Thiel’s political influence, the company remains in a favorable position politically.
Commercial Traction
- Formed a strategic AI partnership with Databricks, creating a unified data architecture combining Palantir’s AIP and Databricks’ processing ecosystem
- Announced Archer Aviation as a foundation partner, using Foundry and AIP to scale next-gen eVTOL manufacturing
- Entered a partnership with France’s SAUR, deploying AIP and Foundry to streamline contract management with over 300 users onboarded in months
- and more...
These engagements underscore growing demand in critical industries, from aerospace to commercial services, extending AIP’s footprint beyond defense.
Strengthening Fundamentals
Palantir’s underlying business continues to gain strength. In Q1 2025, the company delivered 39% year-over-year revenue growth, with U.S. commercial revenue surging 71%, driven by rapid AIP adoption and over 500 bootcamps conducted to accelerate deployment.
Profitability remained strong, with adjusted operating income hitting $373M and an impressive 45% margin. Looking ahead, Q2 guidance forecasts revenue of nearly $937M, just shy of the critical 40% Y/Y growth benchmark.
Most notably, Palantir’s Rule of 40 score climbed to 81%, a standout figure that reflects its rare combination of high growth and high profitability, and puts it well above the threshold typically considered “elite” in the software industry. This level of operational efficiency is exceptionally rare at Palantir’s scale, and underscores the company’s ability to grow while maintaining financial discipline.
Priced Beyond Perfection
Since I published the original narrative, Palantir’s stock has doubled, recently trading above $150, and now commands an eye-watering 116x P/S ratio. Investor sentiment is euphoric, and even long-time skeptics have shifted to neutral, not because the valuation makes sense, but because execution has been impossible to ignore.
At this point, the stock isn’t just priced for perfection, it’s priced beyond it.
With Q2 earnings due August 4, the company will need to post 40%+ year-over-year revenue growth just to meet expectations. Anything short of that could trigger a sharp correction. The margin for error is razor-thin.
I wouldn’t be surprised if we continue rallying toward $160 in the lead-up to earnings, driven by retail momentum and AI hype, before facing a reality check. Seasonality also plays a role, August and September have historically been weak periods for equities, especially after such a sharp run-up.
That said, Palantir is no ordinary software company. It operates at the intersection of AI innovation, enterprise infrastructure, and national defense, a positioning few can replicate. I believe it will continue to command a premium valuation over time and I remain bullish.
But at today’s price, the risk/reward is poor. I wouldn’t buy here. Even with strong execution, the upside from these levels looks limited and there are simply better opportunities elsewhere.
However, if the market panics and the stock pulls back toward what I believe is a more reasonable valuation, I would gladly consider increasing my position.
Palantir is a company I want to own for the long term, just not at any price.
Disclaimer
BlackGoat is an employee of Simply Wall St, but has written this narrative in their capacity as an individual investor. BlackGoat has a position in NasdaqGS:PLTR. Simply Wall St has no position in any companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimate's are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.