This Tech Stock Has Outperformed the Nasdaq 3 Years Running, but Is Down 25% in 2026. Is Now the Time to Buy?

Over the prior three years, Palantir Technologies (NASDAQ: PLTR) was one of the hottest stocks, with triple-digit gains in 2023 (167%), 2024 (340%), and 2025 (135%). However, 2026 has not been as kind to the stock, as it's down more than 25% as of May 13.

The stock's performance, though, is certainly not reflective of how the company has been performing operationally. Instead, it is more a result of the company getting caught up in the software-as-a-service (SaaS) stock sell-off and a high valuation. From an operational standpoint, Palantir continues to hit it out of the park.

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This was evident in its Q1 2026 results, as Palantir saw revenue growth accelerate for the 11th consecutive quarter. Its overall revenue growth surged 85%, led by 133% growth among U.S. commercial customers and 84% growth among U.S. government customers.

While the company continues to add new customers at a brisk pace, with its U.S. customer count up 42%, perhaps the most impressive metric from its Q1 report was that its net dollar retention was 150%. This means that after a year, its existing customer base is expanding rapidly.

This speaks volumes to Palantir's position within the artificial intelligence (AI) ecosystem. The company's Artificial Intelligence Platform (AIP) has become essential in helping make AI useful in the real world.

Rather than focusing on creating the next great large language model (LLM), Palantir instead played to its strength in data gathering and analytics. Its platform can gather data from disparate sources within an organization and then tie it into an ontology that links that data with its real-life counterparts, whether that be physical assets, processes, or concepts. This essentially makes AIP like an AI operating system that helps act as a source of truth and significantly reduces costly AI hallucinations.

Is the stock a buy?

Despite the stock's decline this year and the company's rapid growth, Palantir's shares are still not exactly in the bargain bin. The stock trades at a forward price-to-sales (P/S) ratio of 40.5 times 2026 analyst estimates, and based on 2027 estimates, it drops to a 28 times multiple.

While those are still some hefty valuation metrics, given its extraordinary revenue growth and the position its platform has embedded itself in the AI landscape, there is certainly reason to believe that Palantir could not only grow into its valuation but one day become one of the most valuable companies in the world.

As such, investors can consider taking a small position in the stock and later look to buy more shares on any further dip.

Geoffrey Seiler 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.