Here's What a $1,000 Investment in Palantir Stock Could Be Worth in 5 Years (Hint: It's a Lot)
Key Points
Palantir has become an important AI operating system and is seeing rapid revenue growth as a result.
The stock could still easily more than double over the next five years, and has the potential to triple.
Palantir Technologies (NASDAQ: PLTR) is one of the most exciting growth stories in artificial intelligence (AI). And despite what looks like a hefty valuation, the stock could have considerable upside over the next five years.
The company has become one of the premier software-as-a-service (SaaS) companies when it comes to AI. The combination of its Foundry solution with its Artificial Intelligence Platform (AIP) layered on top has turned it into an important AI orchestration layer that is akin to an AI operating system. Palantir's Foundry solution comes from the company's roots as a data gathering and analytics company; it collects data from a wide variety of sources and puts it all into an ontology that connects to an organization's assets and operational workflows. AIP then acts as an important execution layer for third-party AI models with strict guardrails and audit trails. In essence, it helps make AI more useful in the real world by significantly reducing the possibility of costly AI hallucinations.
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The success of AIP can be seen in Palantir's numbers. The company's revenue growth has accelerated every quarter for three straight years, led by its strength with U.S. commercial customers. Last quarter, its overall revenue climbed by 93% to $1.94 billion, while its U.S. commercial revenue surged 149% to $764 million. Meanwhile, its U.S. commercial remaining deal value climbed 124% to $6.24 billion. The U.S. government remains Palantir's largest customer, and that business segment's growth has also been rapidly increasing, climbing 90% year over year in Q2 to $809 million.
How strong Palantir's solution is, though, is evident in its performance with existing customers. The company's net revenue retention over the past 12 months for customers that have been with the company for a year or more was an astonishing 157%. This means that among that cohort of established customers, the average client increased its spending on Palantir's services by 57%. A number that high is rare.
Palantir is also good at attracting new customers. Potential clients are brought in to "AI boot camps" where it demonstrates within a week's time how its services can solve actual problems those organizations are facing. This has greatly sped up Palantir sales cycles. Last quarter, it grew its U.S. commercial customer count by a solid 35% year over year and 6% sequentially. Deals are also getting bigger, with a 1.7x increase in U.S. commercial deals over $1 million and a 1.6x increase in deals over $5 million.
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Where could Palantir trade in five years?
High-gross-margin SaaS companies in growth mode are typically valued using a forward price-to-sales (P/S) metric. The reason for this is that their profits can often be artificially depressed because the costs of acquiring customers are recognized immediately, while the revenues those customers provide are spread out over years.
Analysts currently project that Palantir will generate $53.4 billion in revenue in 2032. However, that's probably at least $1 billion to $2 billion too low, given its pattern of consistently beating expectations, so I will base my calculations on revenue of $55 billion that year. If it's delivering revenue growth in the 25% to 30% range, Palantir's stock could still easily command a 20 times forward P/S multiple at that time. Notably, CrowdStrike is expected to grow its revenue in the mid-20% range and trades at a forward P/S multiple of around 40 times, so this assumption is relatively modest.
A 20 times forward P/S multiple on revenues of $55 billion would give Palantir a market cap of around $1.1 trillion, or a share price of $460. That's about 138% upside from current levels, and assumes some pretty significant multiple compression (down from a 55 times forward P/S multiple today based on 2026 estimates). That would turn a $1000 investment made today into a position worth about $2,380.
If the stock were to trade at a 30 times forward P/S multiple, Palantir would have a $1.65 trillion market cap, or a $688 stock price, good for a 256% gain. That $1000 initial investment would then be worth about $3,560.
So while Palantir may look pricey today, the stock could still have a lot of upside from here.
Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Palantir Technologies. The Motley Fool has a disclosure policy.