Palantir Technologies PLTR released its fourth-quarter earnings report on Feb. 2. Here’s Morningstar’s take on Palantir’s earnings and stock.

Key Morningstar metrics for Palantir Technologies

  • Fair Value Estimate: $150.00
  • Morningstar Rating: ★★★
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Uncertainty Rating: Very High

What we thought of Palantir Technologies’ Q4 earnings

Palantir shares are up after fourth-quarter results exceeded management’s forecast across nearly all metrics, and the firm guided for 61% revenue growth in 2026, 15% above FactSet’s consensus. The rule of 40 (the sum of revenue growth and operating margin) reached 127% (an all-time high) in the quarter.

Why it matters: While Palantir’s premium valuation multiple and potential for rapid compression remain the core bear thesis, a comparative analysis of prior innovators and their distribution of long-term growth rates gives comfort that Palantir is fairly valued.

  • Palantir trades at roughly 90 times its trailing 12-month revenue, a 350% premium over other artificial intelligence firms. We believe the company needs to deliver an average annual growth rate of 30% over five years (the 75th percentile of the software universe) to justify investing at these levels.
  • Our analysis of previous technological innovators dating back to the 1970s shows that 30% average annual growth over five years is possible, especially when a new category emerges, like Palantir’s ontology framework, and rapid expansion follows.

The bottom line: We maintain our narrow moat and raise our fair value estimate to $150 per share from $135, driven by Palantir’s highest ever annual growth guidance, the lack of a true competitor to Palantir’s ontological framework, and increased expectations for US commercial adoption.

  • While many software investors have been burned by the “AI displaces software” thesis that has hit many software stocks, Palantir is an outlier. The platform appeals to automation-hungry enterprises by harnessing the latest language models to work with or replace legacy products.

Between the lines: During the earnings call, management continued to characterize Europe as an AI laggard. While we are disappointed to hear this, given the size of the total addressable market, American growth is exceeding our expectations, and we were encouraged to learn that Arab states are exploring access to AI defense solutions.

Fair Value estimate for Palantir Technologies

With its 3-star rating, we believe Palantir’s stock is fairly valued compared with our long-term fair value estimate of $150 per share, which implies a 2026 enterprise value/sales multiple of 53 times.

In our opinion, the primary driver of the stock’s value is the total addressable market Palantir’s software can ultimately serve. TAM size is truly a trillion-dollar question that is unfortunately laden with assumptions. Our base case has Palantir’s TAM growing to $1.4 trillion by 2033. We forecast 43% average annual growth between 2026 and 2030. Our analysis concludes that we are in the early innings of an AI revolution. In our base case, we expect Palantir to have a growth profile similar to that of innovative software companies like Salesforce in the late 2010s.

Economic Moat rating

We believe Palantir warrants a narrow moat rating, based on switching costs and intangible assets. Companies like AWS, Snowflake, and ServiceNow have developed data analytics tools, but Palantir differentiates itself as the only AI company with a framework that organizes disparate datasets and facilitates optimized decision-making. This machine-learning framework that identifies opaque yet significant relationships in data and creates solutions for the end user is referred to as the “ontology framework.” Palantir engineers a read-write feedback loop that enables connectivity throughout a business, creating an accessible analytical framework to drive nuanced decision-making that improves over time.

Financial strength

We view Palantir’s financial position as healthy and improving. As of December 2025, the firm had approximately $1.42 billion in cash and cash equivalents and no debt. It now has three full years of GAAP profitability under its belt, with 2025 more than three times as profitable as 2024, and 2024 more than twice as profitable as 2023. We expect rapid growth and profitability to continue.

Palantir has had dilution concerns revolving around high stock-based compensation, which puts a non-cash drag on profitability. We saw a significant one-time stock-based compensation expense of $120 million in the fourth quarter of 2024 triggered by the stock price exceeding $50 per share, but we do not expect this to be a trend. Stock-based compensation averaged 34% of revenue from 2021-2023, but this figure has decreased as the company has grown. Palantir also announced a share repurchase plan in 2023 of up to $1 billion to address dilution concerns.

Risk and Uncertainty

We assign Palantir a Very High Uncertainty Rating. The company’s biggest uncertainty is the broad potential size of the TAM that its software can serve, and the level of customer penetration it can achieve. Downward share price corrections can be severe and painful when there is an unfavorable change in investors’ perception of future market size. We have modeled multiple scenarios for future demand, and the resulting range of valuations is extreme, illustrating the massive uncertainty investors face.

We do not see a direct comparable to the superior capabilities of Palantir’s ontology framework. As such, we like the competitive positioning and value proposition as it stands today. That said, there is the chance that a new entrant or a technological juggernaut like Google will develop software rivaling Palantir’s AI solutions. A new entrant encroaching on Palantir’s position would increase competition and diminish pricing power. Protecting Palantir is the 10–20-year head start it has on AI solutions derived from machine-learning software. A new entrant would need to invest large amounts of capital into research and development to surpass the Palantir offering.

PLTR bulls say

  • Palantir has developed the premier AI software and is well-positioned to capitalize on trends toward digitization, automation, and reindustrialization. We believe Panatir’s software maintains a strategic position in the AI value chain as a model orchestrator.
  • Palantir’s ontological framework and AI orchestration allow for the democratization of machine learning. Its software is useful to employees at all levels of a business to drive efficiency enhancements.
  • Palantir stands to disproportionately benefit from a Golden-Dome-led fiscal spending boom and lacks a clear competitor.

PLTR bears say

  • Palantir’s end markets are confined to entities that coalesce with Western ethos. This caps the total addressable market.
  • The decreasing cost of AI inference and the convergence of LLMs will result in lower barriers to entry in the AI decision-making software industry that Palantir currently dominates.
  • Palantir’s high valuation multiple leaves no margin for error in terms of execution. Any fears on the maintainability of growth will be met with sharp selloffs.

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