Up Over 35% Since Aug. 3, Is it Too Late to Buy Palantir Stock?

Palantir Technologies (NASDAQ: PLTR) has been on a major rally since reporting second-quarter results on Aug. 3. The stock is up more than 35% since then, helping reverse a lackluster 2026. But have investors missed the boat?

I think Palantir stock still has some issues, but everything will hinge on how long it can maintain its incredible growth rates, as this is what's driving Palantir to be one of the most exciting stocks in the artificial intelligence (AI) sector.

Image source: The Motley Fool.

Palantir's growth continues to accelerate

Palantir has been in the AI game longer than most AI firms have existed. It started as government-focused software that helped its users quickly sort through data and drive actionable insights. Eventually, that expanded to the civilian market, and now Palantir is widely used across both sectors.

Palantir's software is an easy way to deploy AI assistance on existing systems and allows its clients to step into the AI age without having to start over. This has made Palantir's product wildly popular, which is showing up in its results.

During Q2, Palantir's U.S. revenue grew 115% year over year, headlined by U.S. commercial increasing an astounding 149% year over year and U.S. government rising 90%. These are incredible figures, but what makes them even more powerful is that they're not one-time boosts. If you've followed Palantir for a while, you know these growth rates have continued accelerating quarter after quarter for several years.

Every quarter, both Palantir's management and Wall Street analysts project that growth will start to slow, but it never does. This makes Palantir an exciting business to follow, but it can also make it difficult to project.

Companywide, Palantir's revenue rose 93%, and it delivered an incredible 55% profit margin. These are impressive figures that any company would love to have, but it also makes Palantir's stock quite expensive.

Although Palantir's valuation has come down, it still trades at more than 100 times forward earnings.

PLTR PE Ratio (Forward) data by YCharts

That's an expensive price to pay, but is it worth it? That depends on its growth rates.

Wall Street analysts project Palantir's revenue growth rate to deteriorate to 49% next year. Assuming that Palantir's profits grow in line with revenue, that still leaves Palantir a fairly pricey 74 times forward earnings. But if Palantir can double its revenue next year by maintaining its rapid growth rate, then it could reach about 50 times next year's earnings, which is very expensive but still much more reasonable.

If Palantir can continue posting blowout results, its recent rally may be just the beginning. However, if Palantir's growth rate starts to slip, I think the stock could reverse and give up much of its gains, as there is a lot of success priced into Palantir right now.

Keithen Drury 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.