Palantir PLTR released its first-quarter earnings report on May 5. Here’s Morningstar’s take on Palantir’s earnings and stock.

Key Morningstar metrics for Palantir Stock

  • Fair Value Estimate: $153
  • Morningstar Rating: ★★★
  • Morningstar Moat Rating: Narrow
  • Morningstar Uncertainty Rating: Very High

What we thought of Palantir’s Q1 earnings

Palantir shares are down slightly after reporting first-quarter results, which we suspect is due to a slight miss on US commercial revenue relative to expectations (FactSet). Still, the rule of 40—the sum of revenue growth and operating margin—reached 145%, yet another all-time high.

Why it matters: The key debate is not whether Palantir is a great company (it is; we rarely see this combo of growth and profitability), but rather if the valuation can make sense (it can, but things need to go well) and if frontier models represent a true competitive threat to Palantir’s ontology (it’s possible, but not probable).

  • Aside from the small revenue miss in the US commercial segment, which can be explained by customer reclassification, the continuation of triple-digit growth and best-in-class customer retention is impressive. Still, the stock’s high expectations and uncertainty about competition have us waiting for a better entry.
  • A comparative analysis of prior innovators and their distribution of long-term growth rates gives us confidence that Palantir is fairly valued, but we are paying close attention to efforts from artificial intelligence labs (for example, OpenAI’s DeployCo) that are attempting to copy Palantir’s deployment strategy.

The bottom line: We maintain our $153 fair value estimate for narrow-moat Palantir, as we balance an increasingly bullish revenue and margin forecast (raising our average annual growth over the next five years to 45% from 42%) with increased competition from AI labs, which we capture with a lower growth rate beyond 10 years (to 12% from 15%).

  • The success of Palantir’s forward-deployed engineer strategy, integrating tightly with customers to reduce time to value, has attracted copycat strategies from AI labs, but we still think Palantir’s ontology stacks up well thanks to its governance layers and limitations on competitor context windows (expensive “working memory”).

Fair Value Estimate for Palantir

With its 3-star rating, we believe Palantir’s stock is fairly valued compared with our long-term fair value estimate of $153. This implies a 2026 enterprise value/sales multiple of 48 times. In our opinion, the primary driver of the stock’s value is the total addressable market that Palantir’s software can ultimately serve. TAM size is truly a trillion-dollar question that is unfortunately laden with assumptions. Our base case has Palantir’s TAM growing to $1.4 trillion by 2033. We forecast 52% average annual growth between 2026 and 2028. Our bull case scenario calls for a TAM larger than $1.6 trillion and penetration of nearly 3%, resulting in a valuation of approximately $300 per share.

Economic Moat Rating

We believe that Palantir warrants a narrow moat rating, based on switching costs and intangible assets. Palantir differentiates itself as the only AI company with a framework that organizes disparate datasets and facilitates optimized decision-making. This machine-learning framework, which identifies opaque yet significant relationships in data and creates solutions for the end user, is referred to as the “ontology framework.” Customer growth has been impressive. Since bottoming in mid-2023, we have seen rapid year-over-year growth in the US commercial segment. The company is deeply ingrained within diverse end markets and mission-critical customer infrastructure and has top-of-class net revenue retention metrics that justify a narrow moat rating.

Financial strength

We view Palantir’s financial position as healthy and improving. As of March 2026, Palantir had approximately $2.2 billion in cash and cash equivalents and no debt. Palantir now has three full years of GAAP profitability under its belt, with 2025 more than 3 times as profitable as 2024, and 2024 more than twice as profitable as 2023. We expect rapid growth and profitability to continue. Overall, we do not foresee any material changes to the current capital structure.

Risk and uncertainty

We assign Palantir a Very High Morningstar Uncertainty Rating. The company’s biggest uncertainty is the broad potential size of the total addressable market that its software can serve, and the level of customer penetration it can achieve. We have modeled multiple scenarios for future demand, and the resulting range of valuations is extreme, illustrating the massive uncertainty investors face. If our bear case on TAM emerges or a viable alternative emerges, the shares will likely prove worth far less than we expect.

A new entrant encroaching on Palantir’s position would increase competition and diminish pricing power. Protecting Palantir is the 10– to 20-year head start it has on AI solutions derived from machine-learning software. Considering the sensitivity of the data that Palantir ingests, there is a privacy-related risk should a hack materialize. Fortunately, Palantir’s service allows for advanced encryption techniques, and there has not been a major data breach to date.

PLTR bulls say

  • Palantir has developed the premier AI software. It is well-positioned to capitalize on trends toward digitization, automation, and reindustrialization. We believe Palantir’s software maintains a strategic position in the AI value chain as a model orchestrator.
  • Palantir’s ontological framework and AI orchestration allow for the democratization of machine learning. Its software is useful to employees at all levels of a business to drive efficiency enhancements.
  • Palantir stands to disproportionately benefit from a Golden Dome-led fiscal spending boom and lacks a clear competitor.

PLTR bears say

  • Palantir’s end markets are confined to entities that coalesce with the Western ethos. This caps the total addressable market.
  • The declining cost of AI inference and improvements in agentic LLMs will lower barriers to entry in the AI decision-making software industry, which Palantir currently dominates. Anthropic and OpenAI could become viable competitors.
  • Palantir’s high valuation multiple leaves no margin for error in terms of execution. Any fears on the maintainability of growth will be met with sharp selloffs.