Palantir's demand boom isn't slowing

Even in the super-charged aerospace and defense sectorup nearly 40% in the year ended Sept. 26Palantir (PLTR) stands out. The question is, is it over-valued?

Palantirs strengths are commanding: hundreds of government and private enterprises have adopted its Artificial Intelligence Platform (AIP), enabling them to turn existing systems into agents and automations quickly.

The companys share price is up more than 370% over the most recent 12 months. Perhaps more important, Palantir has influence, with deep connections in a Trump administration committed to big spending increases in defense and security.

At the same time, Palantirs forward price-earnings ratio is an enormous 204. To put that in perspective, ServiceNow, which also features critical AI tools and serves the defense industry, has a forward P/E of just 46.5 on a 2Q revenue growth rate nearly half Palantirs.

So lets break it down.

Palantir delivers hefty punch

Palantir reported 48% year-over-year revenue growth in 2Q25 to just above $1 billion. Revenue from U.S. customers soared 93% YOY to $306 million, while its sales to the federal government climbed 53% YOY to $426 million.

CEO Alex Karp attributed the strong performance largely to the astonishing impact of AI leverage. The companys high-level security clearance also continues to give it an edge.

Efforts to recruit security-cleared talent offer a window on Palantirs accelerating growthincluding hiring by Palantir itself and by an ecosystem of more than 500 clients, partners, and subcontractors, all looking to fill positions requiring expertise in Palantirs platform.

As tracked by ClearanceJobs.com, security-cleared job postings for the Palantir ecosystem grew steadily over the past 18 months.

In the first half of 2024, these firms posted an average of 30 jobs per month in the intelligence and defense sectors. That pace rose to 40 per month starting in the fall of 2024 and extending through the spring of 2025. By summer, they were approaching nearly 50 per month.

Similarly, the Palantir partner ecosystem averaged about 25 job postings monthly in the data and analytics sector throughout 2024, climbing to nearly 50 in March, April, August, and September of this year. Roles in this category underpin Palantirs AI development and implementation efforts.

The surge in security-cleared hiring is evidence that the tech giant is preparing for a significant increase in work to fulfill major federal contracts.

Palantir is pricey

A year and a half ago, Palantir faced some headwindsincluding an unsettled electoral outlook and related uncertainty about defense spending; a growing cohort of competitors gaining traction; and persistent institutional investor skepticism weighing against retail market enthusiasm.

Two of those issues have since been resolved in Palantirs favor, but the analyst community remains skeptical: Some 14 sell-side analysts have Hold or Sell ratings on PLTR today, while only five call it a Buy. This is roughly the same level of support the company had a year ago.

This past August, The Economist suggested Palantir might be the most overvalued firm of all timecalculating that the company would need to multiply its revenue by 5.6 over the next five years to bring its valuation in line with what Googles was at its 2005 valuation peak.

Achieving this would require maintaining an annual growth rate above 40%.

Competition is fierce

Meanwhile, a cohort of muscular competitors remains in play. ServiceNow is a tech giant in its own right and has teamed up with chip powerhouse Nvidia (NVDA) and Accenture (ACN) to assist enterprises, including the Department of Defense and the U.S. Army, with AI implementations.

IBM (IBM) is also in the sector, while major systems integrators, such as Booz Allen (BAH), specializing in carrying out government agency contracts, are in the same race and could cause PLTRs growth to decelerate over the longer term.

Finally, C3.ailed by the legendary Tom Siebel, specializes in providing AI platforms to corporations and government agencies. The company has had its problems recently, but has nonetheless gained meaningful footholds in both the private sector and in Washington.

Whats next?

Palantirs results will ultimately speak for themselves. But for its share price to go meaningfully higher in the long term, its execution may need to be nearly flawless.

Even so, theres a strong case to be made that Palantir has earned its valuation. It spent years building the data-engineering capabilities that government agencies today rely on. This is backed up by the extensive ecosystem of firms hiring Palantir-skilled, security-cleared talent.

At the same time, going back to its earliest days, Palantir was designing exactly the sort of architecture that would position it to reap the technological and market benefits of an anticipated AI boom. That moment has now arrived, and the company appears positioned to sustain double-digit revenue growth for the foreseeable future.