Since going public in September 2020, the software-as-a-service (SaaS) company, Palantir Technologies Inc. PLTR, has seen significant share gains, with a recent military deal boosting its future growth prospects. Considering this growth, should one invest now or wait for an opportune moment? Let’s assess –  

The NATO Deal – A New Growth Driver for Palantir Stock 

For quite some time, Palantir’s primary customer has been the U.S. government, with the biggest patron being the Department of Defense (DOD). However, Palantir lacked a strong overseas market base. That is about to change due to the company’s latest military deal with NATO (North Atlantic Treaty Organization). 

NATO will use Palantir’s Maven Smart System, an artificial intelligence (AI)-powered tool that analyzes drone and satellite data to track troop movements and provide strategic recommendations. The NATO contract was settled in six months, with the system set to be operational in 30 days. Maven has been deployed by the U.S. government and used by Ukraine in its conflict with Russia. 

Now, with President Donald Trump showing his intent to leave NATO if other countries don’t increase their defense budget, European members have enhanced their military outlays. This, in turn, could help Palantir secure more defense contracts in the international market and grow its customer base. 

Palantir’s Customer Base Is Increasing 

Palantir’s commercial customer count has improved in the United States as customers continue to use its platform to pinpoint problems for AI-driven solutions. Palantir’s largest customer, the U.S. government, also embraced its AI solutions.  

In the fourth quarter, Palantir’s total customer count climbed 43% from a year ago, and the company was able to register 129 deals worth at least $1 million. This shows that Palantir is profiting from the expanding AI software market, expected to reach $5.2 trillion in revenues by 2035, as per Roots Analysis. 

Palantir’s revenues of $828 million in the fourth quarter were up 36% year over year (YoY), and the revenue guidance of $3.75 billion for 2025 was also up 31% YoY. Management expects its revenues to continue to improve due to the ever-growing popularity of Palantir’s Artificial Intelligence Platform (AIP), which excels in automating tasks beyond human capacity. 

Palantir’s Business Model is Immune to Tariff Woes 

In early April, Wall Street’s bullish trend weakened due to the Trump administration imposing tariffs on most of its trade partners, like China, leading to stocks trading in the red amid concerns over supply-chain disruptions and strained foreign relations. 

However, the Palantir stock has gained 9.9% month to date, and in contrast, the Internet-Software industry fell 5.6%. Prominent names from the industry, such as Automatic Data Processing, Inc. ADP and Arista Networks Inc. ANET, also saw their shares decline 3.7% and 7.2%, respectively, so far this month.  

Image Source: Zacks Investment Research

Palantir maintained its value as the company avoided the impact of Trump’s tariffs due to its revenue streams being hardware-free. Palantir’s operations are also U.S.-centric, so it faces fewer risks from new tariffs on multinational corporations. 

Is It the Right Time to Buy the Palantir Stock? 

Given the NATO deal, growing customer base, AIP approval, and the stable business model amid market volatility, stakeholders are recommended to retain the stock for potential gains. 

However, Palantir’s lofty valuation is a concern at the moment. The company’s forward price-to-earnings (P/E) ratio of 167.05 suggests that it has set a high expectation, risking a stock crash if growth projections are not met.  

                                                              P/E – F1 
                     PALANTIR TECH (PLTR) vs. Internet Software Market 

Image Source: Zacks Investment Research

Therefore, new entrants should wait for a significant price drop before buying shares of Palantir, which is well-positioned to benefit from the expanding AI software market. Palantir currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report

Arista Networks, Inc. (ANET) : Free Stock Analysis Report

Palantir Technologies Inc. (PLTR) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research