Palantir is betting its deal-making machine will satisfy investors

Few stocks captured the AI frenzy like Palantir Technologies. The company became a go-to reference among investors looking for the next wave of AI adoption.

But over the course of several bumpy months, Palantir has sought to maintain investor optimism by announcing a string of private-sector and government wins. Some analysts wonder whether a steady stream of deals and partnerships alone can justify its lofty valuation.

A mix of metrics

Palantir’s latest developments paint a generally positive picture, but there are a few notable blemishes.

Tentpoles supporting the bullish case include:

• Landing a $1 billion blanket purchase agreement with DHS
• Remaining performance obligation jumped to $4.2 billion, a sign of future revenue
• US commercial revenue is up 137% year over year
• Government revenue climbed 66% over the same period
• Its rule-of-40 score hit 127%, well above the ‘healthy’ threshold of 40
• Israel Englander’s hedge fund Millennium Management recently increased its stake

Partnership momentum is also building, including a new alliance with Rackspace Technology to speed enterprise AI development.

But serious concerns remain, including shares trading at triple-digit earnings multiples. And CEO Alex Karp didn’t help matters with the controversy surrounding his $17.2 million private jet costs. Meanwhile, there’s a brewing ethical debate around Palantir’s expanded relationship with the federal government.

Toss in the fact that PLTR stock is one of the most expensive in the S&P 500, and the forecast becomes even more complicated.

Business might be booming, but expectations remain sky high.

Burry’s worries

When Michael Burry talks, markets tend to pay attention. And now, the famed “Big Short” investor is amplifying his argument that Palantir’s winning streak might not last.

Among his key concerns is the fact that accounts receivable has been growing faster than revenue in nine of the last 12 quarters. He also flagged questions around cost allocation and profit quality.

Burry sees a fair-value estimate near $46 per share in his base case, but Wall Street hasn’t given up on PLTR stock yet. Bullish analysts point to Palantir’s financials:

• $1.4 billion quarterly revenue, for a 70% year-over-year increase
• 180 deals worth $1 million or more in the latest quarter
• Gross margins above 80%
• 2026 revenue expected to come in at around $7 billion

There’s no doubt Palantir is executing at a breakneck speed, but all the hype around these deals only translates to reliable upside if the fundamentals keep pace.