Prediction: This Will Be Palantir's Stock Price by the End of 2030

One of the best-performing stocks of the artificial intelligence (AI) era is Palantir Technologies (NASDAQ: PLTR). The company has become the enterprise software extraordinaire in the last few years, showing tremendous revenue growth from enterprises looking to adopt its systems.

The stock price is up more than 600% in the last five years, and it now has one of the largest market caps in the world, at $416 billion as of this writing. Where will Palantir's share price be at the end of 2030, over four years from now? Let's run the numbers and find out.

Image source: Palantir Technologies.

Rapid growth in AI services

Enterprise AI has been a growing trend in recent years, with large organizations looking to build custom tools for their businesses. Instead of outsourcing all of their data to start-ups like Anthropic, Palantir can step in and help these businesses build custom AI tools to give them what it calls "AI sovereignty" over their data.

This has led to huge growth from U.S. commercial customers. Last quarter, Palantir's revenue grew 93% year-over-year to $1.9 billion, with U.S. commercial revenue up 149% to $764 million. The company keeps signing massive deals for businesses to build them AI analytical tools, signing 73 deals worth $10 million or more last quarter alone.

All of these figures are impressive, but investors need to ask how fast the company will grow from now until 2030. It has already shown signs that future revenue growth may slow from the current blistering pace, with total deal value of $3.37 billion signed last quarter, up 49% year over year. Still nice figures, to be sure, but the percentage of growth from the business looks like it will slow at a higher revenue level, which happens to most stocks.

Tremendous margin expansion

What makes Palantir perhaps most impressive is its ability to grow with rapidly expanding profit margins. Last quarter, its GAAP (generally accepted accounting principles) operating margin was 47%, meaning $912 million in quarterly earnings. The company has to invest in research and sales to win contracts, but it is currently doing so very efficiently.

This proves that Palantir's software is legitimately valued by enterprises, which should lead to durable revenue and earnings in the years ahead. Once you pay Palantir to set up a vast analytical system for your business, it is unlikely you will get rid of it, and if you do, not for many years. This should make the business highly predictable in terms of contract revenue.

PLTR PS Ratio data by YCharts

Where Palantir's stock price will be by 2030

For Palantir investors today, the question is not whether it is a good business that will benefit from AI, but how big its revenue and earnings will be in the years ahead. Right now, the stock trades at a market cap of $416 billion, while generating just $6.2 billion in trailing revenue. That is a price-to-sales ratio (P/S) of 73, making Palantir one of the most richly valued stocks out there today.

Hundreds of billions of dollars are spent globally on enterprise software each year, a figure that continues to grow in the age of AI. For Palantir, it wouldn't be surprising if its revenue grew to $15 billion to $20 billion by 2030, as long as it continues to win AI deployment contracts. And $20 billion in revenue, with its profit margin potential, could mean $10 billion in annual earnings, at least before taxes.

Still, that is more than 40x the stock's current market cap. Unless Palantir can sustain an ultra-premium multiple of its earnings, the share price is likely lower at the end of 2030 than it is today.

Brett Schafer 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.