Where Will Palantir Stock Be in 5 Years?

There are few things more exciting than a growth stock that keeps on growing. And with shares up by almost 560% over the last five years, Palantir Technologies (NASDAQ: PLTR) certainly fits the bill.

That said, the stock's performance has slowed down over the last 12 months as investors wait for its operating performance to catch up with its relatively elevated valuation. Let's dig deeper into recent results and artificial intelligence industry trends to decide what the next half-decade might have in store.

Image source: Getty Images.

Why Palantir?

Founded in 2003, Palantir emerged as an early adopter of big data analytics. This technology involves helping clients sift through vast amounts of internal data to identify fraud, overlooked opportunities, and other actionable trends. But the company really stood out with its government work -- participating in high-profile missions like tracking down Osama bin Laden during the war on terror and assisting the first Trump administration with migrant interdiction and deportation.

Palantir's big break came with the arrival of generative artificial intelligence, as it synergizes well with the company's existing software and business model. Now, data analytics insights can be uncovered faster through conversational prompts instead of complex workflows. And interest from enterprise clients has begun to soar.

Business is booming

Palantir's second-quarter earnings highlight what CEO Alex Karp calls "otherworldly" performance. And he has a good point. Revenue soared by 93% year over year to $1.94 billion, driven by a 149% surge in the U.S. commercial segment as more businesses adopt its AI-driven data analytics software-as-a-service (SaaS) offerings.

U.S. enterprise clients now generate almost 40% of Palantir's total revenue. And this is an encouraging vote of confidence in the quality of its software. The company is capable of holding its own in an incredibly competitive industry that includes big names like Snowflake and Microsoft (which offers the rival data analytics platform Fabric).

Palantir likely stands out because of its trust and brand image. Clients figure that if its platforms are secure enough to serve the top-secret requirements of the CIA, Department of Defense, and NATO, they will be good enough to keep internal corporate data safe.

Karp leans into Palantir's security-first image by stressing that its clients' data will never be used to train future AI models. And earlier this month, The Information reported that the company could cease or restrict its use of leading third-party models due to privacy concerns. Palantir is also reportedly pressuring Anthropic to offer irrevocable zero-data-retention guarantees before making its models available on its software platform, highlighting Palantir's deep commitment to security.

What will the next five years bring?

Ultimately, most of a company's value comes from its ability to maintain and grow its earnings over the long term. And Palantir doesn't seem likely to have any problems in that department. Its bottom-line performance is even more impressive than its top line, with second-quarter earnings per share (EPS) jumping 215% year over year to $0.41.

To be fair, Palantir's stock is still optimistically valued with a forward price-to-earnings (P/E) ratio of 75 compared to the S&P 500 average of 20. But after 12 months of practically flat performance (coupled with massive earnings growth), this number has come down substantially from the highs above 200 seen for much of 2025.

Over the next five years, I expect Palantir stock to substantially outperform the rest of the market. And its proven consumer-focused business model could help shield it from the uncertainties faced by AI infrastructure companies that must spend billions on data center capacity to serve an LLM market that still isn't consistently profitable. That said, while Palantir stock looks like a good long-term buy, patient investors may want to wait on the sidelines until growth catches up to the valuation.

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