Palantir Is Down 25%. Here's Why I'm Buying More.

Once a high-flying stock, Palantir Technologies (NASDAQ: PLTR) isn't having a good year. The stock is down about 25% so far this year, putting it firmly in bear market territory.

But I'm convinced this is an outstanding buying opportunity for what I believe is the best artificial intelligence software company on the planet, and that's why I'm buying more shares of Palantir stock now.

Palantir CEO Alex Karp says any company involved in AI will find something to like in his company's products. Image source: Palantir Technologies.

Palantir's software can't be replicated

The secret behind Palantir's success is its revolutionary software. The company collects data points from thousands of sources, including satellites, to provide real-time insights to commercial customers and government agencies. CEO Alex Karp described how the company works in a 2025 interview.

If you're an intelligence agency, you're using us to find terrorists and organized criminals while maintaining the security and data protection of your country. Then you have the special forces. How do you know where your troops are? How do you get in and out of the battlefield as safely as possible, avoiding mines, avoiding enemies? Then there's Palantir on the commercial side. The shorthand is if you're doing anything that involves operational intelligence, whether it's analytics or AI, you're going to have to find something like our products.

But the magic really began when Palantir incorporated its Artificial Intelligence Platform (AIP) into its Foundry and Gotham products, which allow users to pose detailed queries, automate tasks, and have AI propose and complete real-world tasks.

Three years after launching AIP, Palantir is continuing to grow at a staggering pace. Revenue in the first quarter was $1.63 billion, up 85% from a year ago. The company said its U.S. commercial revenue jumped 133% from a year ago to $595 million, and U.S. government revenue increased 84% to $687 million.

The company closed 206 deals in the first quarter, with at least $1 million each, 72 of them at least $5 million, and 47 at least $10 million. Overall, in the quarter, Palantir closed $2.41 billion in total contract value.

The company increased its full-year guidance, now calling for revenue in a range of $7.650 billion to $7.662 billion. Previous guidance was for revenue between $7.182 billion and $7.198 billion.

The valuation is improving

The biggest red flag for many investors has been Palantir's staggering valuation -- or, perhaps, its once-staggering valuation. In December, Palantir's forward price-to-earnings ratio was more than 240, and its forward price-to-sales ratio topped 90. But those numbers moderated in the first half of this year.

PLTR PE Ratio (Forward) data by YCharts

Yes, Palantir is still expensive. But it's a unique company providing software that is changing the way businesses operate, from managing supply chains to tracking inventory to conducting competitive analysis. And its military applications are significant enough that the Pentagon is making its AI-powered Maven Smart System an "official program of record," which would streamline Maven's adoption across all branches of the military and provide Palantir with long-term funding.

Palantir stock still has a long runway, which is why I'm buying the dip in 2026.

Patrick Sanders has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.