Is Palantir Stock a Buy?

Palantir Technologies (NASDAQ: PLTR) just released its results for the third quarter of 2025, and not surprisingly, its growth continues to accelerate. The massive productivity gains brought about by the company's Artificial Intelligence Platform (AIP) have made Palantir one of the more notable stocks of the artificial intelligence (AI) boom.

Unfortunately, the success has taken the stock to stratospheric valuations, which may partially explain why the stock fell 8% in the first trading session after the report and has continued to drop. Amid those conditions, should investors buy Palantir stock, or is it too expensive to touch at current levels?

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Palantir's Q3 earnings report

Investors have long known the company for its AI-driven analysis tools, Gotham and Foundry. These platforms, designed to analyze national security and commercial data, respectively, became well-known for delivering actionable insights.

However, the release of the AIP supercharged those abilities through the use of generative AI. As more organizations applied this tool, they began to experience eye-popping productivity gains, which now accrue to Palantir's top and bottom lines.

That applies to the current quarter, and knowing that, one might struggle to find anything negative to say about Palantir's report for the third quarter of 2025. The company generated nearly $3.1 billion in revenue for the first three quarters of 2025, representing a 51% year-over-year increase. This includes a 63% annual rise in Q3 and an 18% increase compared with the previous quarter.

In comparison, operating expenses grew by 23% during the same period. This resulted in $839 million in operating income. Palantir also earned just under $200 million outside its operations, primarily from interest income. With that, its net income attributable to shareholders was just over $1 billion in the first three quarters of 2025, well over the $383 million during the same year-ago period.

How investors reacted

As mentioned, the results were not enough to prevent a sell-off after the earnings announcement. Stock gains over the last year are around 350%, so longer-term investors are likely still happy with its performance. Nonetheless, the drop amid a strong report may foster sentiment that Palantir stock may be priced beyond perfection.

Indeed, its valuation metrics might give investors pause despite the company's performance. Nearly three years after Palantir earned its first quarterly profit, the stock trades at a P/E ratio of almost 620. Even if measured by the 255 forward P/E ratio, the valuation is in nosebleed territory.

In comparison, analysts forecast Palantir's profits will grow 78% this year and 34% more in 2026. While such growth should probably draw a premium valuation, one might rightly question whether profit growth alone will be sufficient to justify its current stock price.

The stock price may also lead investors to conclude that Palantir is a bubble. However, while it is likely the word bubble could describe the current state of the stock, that does not give investors any clear insights into where it will go next.

That is because one key aspect of bubbles is unpredictability. One could argue that Palantir was also a bubble at half its current price, yet the stock kept moving higher. Investors also do not have a clear indication that it has reached a top, despite the post-earnings sell-off. Such conditions should probably persuade investors to stop adding shares or, possibly, avoid the stock altogether.

Is Palantir stock a buy?

Under current conditions, most investors should probably steer clear of Palantir stock.

Admittedly, the move higher may not be done, and that could tempt more risk-tolerant investors to buy the stock as the company's massive growth continues. Furthermore, investors who have held the stock for a year or longer are sitting on considerable gains and likely have a greater incentive to hold.

Nonetheless, paying almost 300 times forward earnings is a tremendously risky move. Given the odds of a significant pullback, most investors should probably refrain from adding shares at current levels.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.