Palantir (PLTR) Stock: Is This 20% Drop a Buying Opportunity?

TLDR

• Palantir’s $394 billion valuation needs to climb 145% to reach the trillion-dollar milestone currently held by 10 companies.
• Q3 revenue hit $1.18 billion with 63% year-over-year growth, driven by 121% surge in US commercial sales and 52% government revenue increase.
• The company trades at a P/E ratio of 444 and P/S ratio of 112, reflecting extreme valuations after a 2,000% rally since late 2022.
• Operating margins improved to 51% in Q3 as the company transitions from development to deployment, with R&D costs dropping to 12.2% of revenue.
• Adjusted free cash flow reached $540 million with total contract value of $2.8 billion, up 151% from last year.

Palantir Technologies sits at a $394 billion market cap. Reaching the exclusive trillion-dollar club would require a 145% stock price increase from current levels.

Palantir Technologies Inc., PLTR

The data analytics company reported Q3 revenue of $1.18 billion. That marks a 63% jump compared to the same period last year.

US commercial revenue exploded 121% to $397 million. Government contracts brought in $486 million, up 52% year-over-year.

The company closed 204 deals worth at least $1 million during the quarter. Of those, 91 exceeded $5 million and 53 topped $10 million.

Palantir’s software suite includes three main platforms. Foundry helps businesses structure data across multiple systems.

Gotham serves government agencies and defense operations. Apollo provides the infrastructure layer for deployment.

Strong Profitability Metrics Emerge

Adjusted operating income reached $600.5 million in Q3. That’s more than double the $275.5 million from a year earlier.

Operating margins expanded to 51% from 38%. Adjusted free cash flow hit $540 million with a 46% margin.

The company’s R&D spending tells an interesting story. It dropped from 18% of revenue in 2024 to 12.2% in Q3 2025.

This shift reflects a move from development to deployment. Hiring data backs this up.

Job postings for software developers peaked at 250 in October 2024. By September 2025, that number fell to around 150.

Meanwhile, positions for operations and deployment staff increased 13%. This pattern typically signals stronger margins ahead.

Valuation Remains a Sticking Point

The stock trades at a forward P/E ratio of 237. Its price-to-sales multiple sits at 112.

These metrics are extreme even for fast-growing software companies. The trailing P/E ratio of 444 is down from a peak of 600 but still well above peers.

Palantir’s market cap was just $12 billion before ChatGPT launched. The stock has since surged roughly 2,000%.

To match Apple’s post-2001 peak P/E of 100, Palantir would need profits to jump 4.5 times. Just three of 16 Wall Street analysts rate the stock a buy.

Total contract value for the quarter hit $2.8 billion, up 151% year-over-year. US commercial TCV reached a record $1.3 billion, up 342%.

Remaining deal value in the US commercial segment grew 199% to $3.6 billion. Adjusted earnings per share came in at $0.21.

The trillion-dollar club currently has 10 members. Nvidia leads at $4.6 trillion, followed by Apple at $4.0 trillion.

Other members include Microsoft, Alphabet, Amazon, Broadcom, Meta, Taiwan Semiconductor, Tesla, and Berkshire Hathaway.

The addressable market for AI software is estimated at $13 trillion. Palantir’s products continue gaining traction in both commercial and government sectors.

The company reported a Rule of 40 score of 114% in Q3. Trailing twelve-month adjusted free cash flow reached $2.0 billion with a 51% margin.