Palantir's Growth Surge Faces Scrutiny Amid High Valuation and Operational Risks

What happened

Palantir reported robust Q4 2025 results with 70% YoY revenue growth and signed 680 deals over $1 million, as highlighted in a Seeking Alpha article that emphasizes accelerating commercial expansion. The article suggests valuation is becoming more reasonable with declining forward multiples and U.S. commercial revenue up 137% YoY, portraying a bullish narrative. However, the DeepValue report critically notes that Palantir's stock trades at a premium P/E of 195x and EV/EBITDA of 210x, pricing in sustained hypergrowth with no margin of safety. Key concerns include the gap between remaining deal value (RDV), which assumes no terminations, and remaining performance obligations (RPO), with termination-for-convenience clauses and rising cloud costs posing operational risks. Despite the growth momentum, the investment case hinges on converting optional backlog into durable revenue while meeting FY2026 guidance for U.S. commercial revenue over $3.144B.

Implication

The growth acceleration validates Palantir's scaling potential but does not alleviate valuation risk, with the stock priced for perfection at 195x P/E. Investors must closely monitor the conversion of RDV to RPO, as optional elements and termination clauses could undermine revenue durability. Margin pressures from a $1.95B long-dated cloud commitment and subcontractor costs threaten profitability, challenging adjusted FCF targets of $3.9B-$4.1B. Near-term catalysts include Q1 2026 results against tight guidance, with any miss likely triggering sharp de-ratings due to elevated multiples. A prudent approach involves waiting for 1-2 quarters of consistent RDV-to-RPO conversion and cost discipline before considering entry, aligning with the DeepValue report's WAIT rating.

Thesis delta

The growth acceleration supports the bull scenario but does not shift the fundamental investment thesis, which remains centered on execution risks and valuation sensitivity. The thesis delta is minimal, as the critical factors—converting RDV, managing costs, and meeting FY2026 guidance—are unchanged and now under heightened scrutiny with each quarterly report.