Palantir: A Dip Worth Avoiding?

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Right. So, Palantir. It’s been having a bit of a moment. Reported earnings were, apparently, ‘stellar’ (a word I’m increasingly suspicious of – everything is ‘stellar’ these days, isn’t it?), causing a brief stock pop. But it’s still down 33% from November. Which begs the question: is now the time to dive in, or just…don’t? It feels like one of those decisions where getting it wrong could mean a lot of explaining to the bank manager. And I really, really don’t want to explain anything to the bank manager.

What Does Palantir Actually Do?

Okay, so they build software. Not just any software, though. It’s the kind that helps large organisations make sense of their data. Apparently, it’s like an operating system for information. They have two main products: Gotham, which is for governments and defence (sounds…intense), and Foundry, for commercial clients. The idea is to integrate everything – all the scattered bits and pieces – into one usable platform. Then, with the help of AI, people can spot patterns, predict outcomes, and generally run things more efficiently. It all sounds very…competent. And competence is good. Isn’t it?

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The Numbers – A Compelling Story (If You Like Stories)

It’s clear they’re doing something right. Sales and earnings have been growing at a frankly alarming rate. See the chart below. It’s…upwardly mobile. Which is reassuring, I suppose. Although charts can be misleading. I once thought a chart meant I was getting a good deal on shoes. I was not.

Historically, Palantir’s bread and butter has been government contracts. Still solid there, thankfully. But the real growth is coming from commercial clients. In the last quarter, they reported 137% year-over-year growth in the U.S. domestic commercial business. 137%! It’s…a lot. Apparently, this is fuelled by their Artificial Intelligence Platform (AIP), which leverages generative AI. Generative AI. It sounds like something out of a science fiction novel. Which, let’s face it, is where most of technology originates.

The Competitive Advantage – Or, Why People Might Get Stuck

The interesting thing about Palantir, as a historian, is the bespoke approach. They don’t just sell you software and wish you luck. They actually tailor it to each client, embedding engineers (they call them “Deltas” – very military) with the client for months. It’s a significant upfront investment, obviously. But the idea is that it creates a powerful, sticky solution. Once those engineers have integrated with a client’s systems and trained their teams, switching to a competitor becomes…difficult. Expensive. And frankly, a bit of a hassle. People generally don’t like hassle.

It’s a clever moat, this. And the military jargon? Inspired. It creates an emotional bond. A common enemy. It’s a bit like joining a book club, only with more data and fewer biscuits.

The Valuation – And the Slightly Terrifying Elephant in the Room

Okay, let’s talk about the valuation. It’s…high. Really high. The forward price-to-earnings ratio is around 160. Which, to put it mildly, is extreme. To justify its $360 billion market cap, Palantir needs to grow consistently by 30% to 40% annually for the next decade. Which, while it’s currently beating that, feels…ambitious. Like planning a surprise party for someone who hates surprises.

They’ll have their hands full staying ahead of the competition – Microsoft, Databricks, and all the others. They’ll likely need to look outside the U.S. for growth. Which brings me to the slightly worrying bit: their growth outside the U.S. is…slowing. The U.K. is stalled at 10%, and growth elsewhere is slowing too. It’s the bit the headlines conveniently ignore.

Palantir is priced for perfection. And that, my friends, is always a dangerous thing. I would caution investors to look elsewhere. Or, at least, to have a very strong stomach. And a very good financial advisor. And possibly a therapist.

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2026-02-06 12:32