Palantir's AI Growth Confirmed, But Valuation and Political Risks Intensify Scrutiny

What happened

A Motley Fool article highlights Palantir's soaring revenue and record profits, driven by AI platform adoption, as CEO Alex Karp notes a once-neglected segment now fueling growth. This aligns with the DeepValue report's data showing Q4 2025 revenue growth of 70% year-over-year to $1.41 billion, with U.S. commercial revenue surging 137% and adjusted operating margins at 57%. However, the report critically notes that Palantir's valuation at ~341x trailing earnings fully prices in hypergrowth, leaving no margin of safety as international commercial growth remains nearly flat. The company's heavy reliance on U.S. government and commercial customers exposes it to political and regulatory risks, such as potential contract cancellations, which could derail growth. While the article portrays robust momentum, the underlying financials suggest that any slowdown from the current 61% guidance or margin compression could trigger severe multiple compression, validating the report's cautious stance.

Implication

The news reinforces Palantir's execution in capitalizing on AI demand, but it does not mitigate the overvaluation concerns highlighted in the DeepValue report, which calls for a 'POTENTIAL SELL'. Sustaining 60%+ growth and 50%+ margins is imperative to justify current multiples, yet international diversification lags, increasing reliance on volatile U.S. markets. Political and regulatory scrutiny, especially around controversial government contracts, poses a tangible threat to high-margin revenue streams. Any miss in future quarterly results or guidance could catalyze a valuation reset, as historical episodes show the stock's sensitivity to growth wobbles. Therefore, investors are advised to trim positions above $190 per share and await a more attractive entry near $110, aligning with the report's risk-reward assessment.

Thesis delta

The article confirms Palantir's near-term growth momentum but does not alter the core investment thesis of overvaluation and elevated risks. The DeepValue report's 'POTENTIAL SELL' rating remains intact, as the company still needs to prove sustained hypergrowth and international expansion to avoid multiple compression. No shift in thesis is warranted; investors should maintain caution and monitor for deceleration or political setbacks.