3 Things Every Palantir (PLTR) Investor Needs To Know

Palantir's (NASDAQ: PLTR) stock has rallied more than 90% over the past 12 months, making it one of the best-performing stocks of the S&P 500. However, investors should know these three things about this hypergrowth tech company before jumping on the bullish bandwagon.

1. Its growth is accelerating

Palantir provides data mining and analytics tools to government and commercial customers. Aggregating data from disparate sources helps its clients make faster data-driven decisions.

Image source: Getty Images.

Its government-facing platform, Gotham, is expanding as the intensifying geopolitical conflicts drive more government agencies to use its services. Its commercial platform, Foundry, is also locking in major customers, including Walmart (NASDAQ: WMT) and Amazon (NASDAQ: AMZN).

Palantir expects its revenue to rise 60%-61% in 2026. That would mark a significant acceleration from its 56% growth in 2025, 29% growth in 2024, and 17% growth in 2023. The growth of its U.S. commercial business, new U.S. government contracts, and the expansion of its AI platform (for creating custom apps) will likely drive that expansion.

2. Its "Rule of 40" has hit triple digits

Like many other software companies, Palantir uses the "Rule of 40" -- its year-over-year revenue growth added its adjusted operating margin -- to measure its success. If that sum stays above 40, then it's expanding at a sustainable rate without sacrificing its own margins.

That closely watched score hit a record high of 127% in the fourth quarter of 2025. That's up from 114% in the third quarter and 81% in the fourth quarter of 2024. That expansion indicates Palantir has plenty of pricing power as economies of scale dilute its operating expenses.

That's why Palantir turned profitable in 2023. Its net income more than doubled in 2024, more than tripled in 2025, and analysts anticipate another 87% growth in 2026.

3. Its stock is expensive

Palantir's business is firing on all cylinders, but much of that growth is already baked into its valuations. At $157 per share with a market cap of $352 billion, it trades at 141 times this year's earnings and 49 times this year's sales.

The bulls will claim Palantir's accelerating growth and expanding margins justify those premium valuations. However, the bears believe the slightest hint of a slowdown or declining margins will compress its valuations and crush its stock. In other words, Palantir is a high-risk, high-reward play at these levels -- and investors shouldn't pay the wrong price for the right company.

Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Palantir Technologies, and Walmart. The Motley Fool has a disclosure policy.