Key Morningstar Metrics for Palantir
- Fair Value Estimate: USD 150
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: Narrow
- Morningstar Uncertainty Rating: Very High
What We Thought of Palantir’s Earnings
Palantir PLTR shares are up after fourth-quarter results exceeded management’s forecast across nearly all metrics, and it guided to 61% revenue growth in 2026, 15% above FactSet’s consensus. The rule of 40—the sum of revenue growth and operating margin—reached 127%, an all-time high, in the quarter.
Why it matters: While Palantir’s premium valuation multiple and potential for rapid compression remain the core bear thesis, a comparative analysis of prior innovators and their distribution of long-term growth rates gives comfort that Palantir is fairly valued.
- Palantir trades at roughly 90 times trailing 12-month revenue, a 350% premium over other artificial intelligence firms. We believe the firm needs to deliver an average annual growth rate of 30% over five years (75th percentile in the software universe) to justify investing at these levels.
- Our analysis of previous technological innovators, dating back to the 1970s, shows that 30% average annual growth over five years is possible, especially when a new category emerges, like Palantir’s ontology framework, and rapid expansion follows.
The bottom line: We maintain our narrow moat and raise our fair value estimate to USD 150 from USD 135, driven by Palantir’s highest-ever annual growth guidance, the lack of a true competitor to Palantir’s ontological framework, and increased expectations for US commercial adoption.
- While many software investors have been burned by the “AI displaces software” thesis that has hit many software stocks, Palantir is an outlier. The platform appeals to automation-hungry enterprises by harnessing the latest language models to work with or replace legacy products.
Between the lines: During the earnings call, management continued to characterize Europe as an AI laggard. While we are disappointed to hear this, given the size of the total addressable market, American growth is exceeding our expectations, and we were encouraged to learn that Arab states are exploring access to AI defense solutions.
