Palantir Technologies, Inc. stock forecast: planned Pentagon spending cuts exert pressure on share price

Palantir Technologies, Inc. (NASDAQ: PLTR) delivered strong financial results in Q4 2024, with revenues rising by 36% year-on-year. The company provided an optimistic outlook for 2025, forecasting further growth in revenues and profits. However, Palantir’s shares have been experiencing heightened volatility due to concerns over potential Pentagon budget cuts and share sales by the company’s management.

This article examines Palantir Technologies, Inc., outlines the sources of its revenues, reviews its Q4 2024 performance, and presents expectations for 2025. Additionally, it provides a forecast for Palantir’s stock in 2025.

About Palantir Technologies, Inc.

Palantir Technologies was founded in 2003 by Peter Thiel, Alexander Karp, Joseph Lonsdale, Stephen Cohen, and Nathan Gеttings. The company went public on 30 September 2020 under the PLTR ticker symbol on the New York Stock Exchange.

Palantir specialises in developing software for big data analysis, including Gotham, designed for national security and intelligence agencies; Foundry, for the corporate sector; and Apollo, for deploying software releases. These products are available to both government and private clients, providing software solutions for data management and analysis, emphasising privacy and security.

Palantir Technologies, Inc.’s main financial flows

Palantir’s revenue primarily comes from the sale of licences for its software products and the provision of related services. The main revenue streams are listed below:

• Licence fees: companies and government agencies purchase licences to use Palantir platforms (Gotham, Foundry)
• Subscriptions and services: in addition to initial licences, Palantir offers subscriptions for technical support and upgrades and services for program implementation, customisation, and personnel training
• Professional services: provision of highly qualified services such as data analysis, development of tailored solutions, and assistance with system integration
• Government contracts: a significant share of revenue is derived from agreements with government agencies, which use the purchased technologies for data analysis in security, intelligence, and other governmental domains
• Corporate sector: in recent years, the company has been actively expanding its presence in the commercial market, where it offers its analytical solutions to large corporations to optimise their business processes, manage risks, and process statistical data

As a result, Palantir’s total revenue is generated through a combination of licensed software sales, subscriptions, professional services, and long-term contracts with government and private clients.

Palantir Technologies, Inc. Q3 2024 report

Palantir Technologies released its Q3 2024 data on 4 November 2024. The key report highlights are outlined below:

• Revenue: 726.5 million USD (+30%)
• Net income: 149.3 million USD (+103%)
• Earnings per share: 0.06 USD (+100%)

Revenue by segment and region:

• US: 498.9 million USD (+45%)
• UK: 69.5 million USD (+10%)
• Other countries: 157.0 million USD (+21%)
• Government: 408.3 million USD (+33%)
• Commercial revenue: 317.5 million USD (+27%)
• US government revenue: 319.8 million USD (+39%)
• US commercial Revenue: 179.1 million USD (+34%)

The report shows that the US government remains Palantir Technologies’ primary source of revenue, contributing nearly half of the company’s total revenue. Palantir forecasted revenue of 767.0-771.0 million USD in Q4 2024, representing a 5-6% increase compared to the previous quarter.

Palantir Technologies, Inc. Q4 2024 report

Palantir Technologies released its Q4 2024 results on 3 February 2025. The key report highlights are as follows:

• Revenue: 827.5 million USD (+36%)
• Net income: 76.9 million USD (-21%)
• Earnings per share: 0.03 USD (-25%)

Revenue by segment:

• Commercial revenue: 372.5 million USD (+31%)
• US government revenue: 343.0 million USD (+45%)
• US commercial revenue: 214.0 million USD (+64%)

Palantir’s CEO, Alexander Karp, noted that the Q4 results continue to impress, emphasising that the company’s early assumptions about the widespread adoption and accessibility of large language models were correct, driving significant growth. He also described the results as part of a long-term vision, saying that Palantir is still in the early stages of a multi-year revolution, for which the company has spent over two decades preparing.

For 2025, Palantir provided an optimistic forecast, expecting revenue in the range of 3.74-3.76 billion USD, equivalent to a year-on-year growth of approximately 31%. These expectations significantly exceed analysts’ previous consensus estimates, reflecting confidence in the steady demand for the company’s AI platforms and software.

US commercial revenue is projected to reach 1.07 billion USD, representing a 54% increase from 2024. In addition, management anticipates an adjusted operating profit of 1.55-1.57 billion USD and an adjusted free cash flow of 1.05-1.70 billion USD. They also forecast that the company will remain profitable on a GAAP basis, maintaining both operating and net income in each quarter of 2025.

For Q1 2025, revenue is projected to range between 858 and 862 million USD, with adjusted operating profit between 354 and 358 million USD, establishing new targets for the year ahead.

Despite Palantir’s positive outlook, recent reports of potential cuts to the US defence budget have raised concerns among investors, as over 40% of Palantir’s Q4 revenue came from US government contracts.

Expert forecasts for Palantir Technologies, Inc.’s stock

• Barchart: of 19 analysts, three rated Palantir Technologies stock as a Strong Buy, 10 as a Hold, one as a Sell, and five as a Strong Sell. The high price target is 141 USD, while the low price target is 18 USD
• MarketBeat: among 22 analysts, 4 assigned a Buy rating, twelve recommended Hold, and six rated it as a Sell. The high price target is 141 USD, while the low price target is 18 USD
• TipRanks: out of 18 analysts, three gave a Buy rating, 10 gave a Hold rating, and five rated it as a Sell. The high price target is 141 USD, while the low price target is 35 USD
• Stock Analysis: of 20 experts, three rated the shares as a Strong Buy, one as a Buy, eleven as a Hold, three as a Sell, and two as a Strong Sell. The high price target is 141 USD, while the low price target is 29 USD

Based on the above information, most market analysts recommend holding the stock.

Palantir Technologies, Inc. stock price forecast for 2025

Palantir’s stock traded within an ascending channel until February 2025. After the release of the quarterly earnings report, the stock price broke above the channel’s upper boundary and reached an all-time high of 125 USD. News of the planned Pentagon budget cuts caused the price to fall back to the upper boundary of the previous channel, which now serves as a support level. Based on Palantir’s stock performance, possible price movements in 2025 are as follows.

The optimistic forecast for Palantir stock suggests a rebound from the trendline, followed by price growth to an all-time high of 125 USD.

The pessimistic forecast for Palantir stock implies a breakout below the 85 USD support level, followed by a decline to 65 USD. If this level is breached, the stock could drop to 45 USD. This scenario is considered more likely due to potential cuts in the US Department of Defense budget, an active share sell-off by the company’s owners (Alexander Karp plans to sell an additional 49 million of his shares), and dilution of the share capital through options and stock issued to employees.

Risks of investing in Palantir Technologies, Inc. stock

Investing in Palantir’s stock in 2025 involves certain risks that may impact the company’s earnings. Below are potential risks and factors that could negatively affect its revenue:

• Pressure from high valuation: Palantir stock is trading at elevated multiples as of February 2025, with, for example, a price-to-sales (P/S)) ratio exceeding 82 against expected revenue and a price-to-earnings (P/E) ratio above 140 against expected earnings. If the company fails to deliver sufficient growth to justify these valuations, investor sentiment may deteriorate, potentially leading to a sharp decline in its stock price. A correction is possible if revenue growth falls short of the projected 25-30% per year
• Reliance on government contracts: a sizeable portion of Palantir’s revenue (approximately 55% in 2024) comes from government clients, particularly US defence and intelligence agencies. Reductions in federal budgets, policy shifts under a new administration, or the non-renewal of key contracts could substantially impact revenue. Political instability or cuts in defence spending would heighten this risk
• Commercial sector challenges: although Palantir’s Commercial revenue is growing, it still constitutes a smaller share of total revenue. The company struggles to scale due to high costs, making it less attractive to small and medium-sized enterprises. If Commercial sector growth slows or fails to offset potential declines in its Government revenue, overall revenue may suffer
• Rising competition: Palantir faces competition from tech giants like Microsoft (NASDAQ: MSFT), which may integrate AI and analytics into broader offerings, and from specialised companies. If competitors offer cheaper or more affordable alternative solutions, Palantir risks losing its market share (especially in the commercial sector), which would negatively impact the company’s financial position
• Economic and market conditions: a potential US recession (with some analysts estimating a 45% likelihood by the end of 2025) could reduce corporate spending on high-cost software like Palantir’s. The average annual revenue per commercial client in the US is 2.23 million USD. Rising Treasury yields or tighter financial conditions may also weigh on growth stocks, indirectly affecting Palantir’s ability to secure new deals
• Regulatory and AI risks: tighter regulation of AI and data analytics, especially in the US and globally, could limit Palantir’s capabilities or increase compliance costs. Concerns over privacy or misuse of its tools (for example, in surveillance) could damage the company’s reputation, deterring clients and reducing revenue
• Share capital dilution due to stock compensation: Palantir actively uses company shares for compensation, reducing their value for shareholders. If this practice continues without corresponding revenue growth, it could undermine investor confidence and put pressure on the stock price, raising doubts about the stability of future revenue
• Stock sales by insiders: in 2024, the company’s insiders, including CEO Alex Karp and co-founder Peter Thiel, actively sold significant amounts of their shares, with Thiel selling a third of his stake in the company during this period. In February 2025, it was announced that Karp had applied to sell an additional 1.00 billion worth of shares. Such insider actions may adversely affect the market stock price and investor sentiment

All these factors reduce confidence in Palantir’s ability to maintain its projected growth trajectory and revenue streams in 2025, making investment in its stock highly risky.

Summary

Palantir’s outlook for 2025 appears uncertain. The company’s high valuation remains a severe problem, suggesting that investors have priced in future successes, leaving almost no room for mistakes. Pentagon budget cuts of 8% per year over five years pose a significant risk as government contracts, especially with the Department of Defense, account for about 40% of Palantir’s revenue. Although the cuts will not necessarily directly affect Palantir’s current programs and could even boost demand for its services, the shift towards border control, drones, and missile defence may restrict broader growth opportunities in the public sector. CEO Alex Karp’s plan to sell another 49 million shares will further pressure the stock value.

On the other hand, Palantir’s Commercial revenue is expanding rapidly, driven by its AI platform and innovative Bootcamp program, pointing to a promising shift towards the commercial sector. However, the company must sustain this momentum to offset potential losses in its Government revenue.

The year 2025 is likely to be turbulent for Palantir, with its stock facing heightened volatility or a price correction if its Government revenue declines. Growth in its Commercial sector and its leadership in AI could serve as a lifeline for the company. Everything will depend on how well Palantir balances these factors. However, its high valuation and insider sales tip the balance towards cautious optimism rather than outright enthusiasm.