Palantir CEO Sees 'Ferocious' AI Growth, But Valuation Concerns Weigh on Stock

Palantir (PLTR) CEO Alex Karp struck a confident tone during the company's Q1 earnings call, calling demand for its AI tools "ravenous" and describing the growth as "ferocious." He made it clear that Palantir isn't just riding the AI wave—it's embedding its technology deep into America's defense systems and commercial landscape. His comments followed a strong Q1 earnings report, with revenue up 39% to $884 million, topping Wall Street expectations. The company also raised its full-year outlook to between $3.89 billion and $3.9 billion. Still, PLTR stock dropped more than 8% in after-hours trading, as investors grew cautious over its high valuation. Let's explore Karp's thoughts on the key business units fueling Palantir's growth. Commercial Business Hits $1B Milestone Palantir’s U.S. commercial revenue surged 71% year-over-year to $255 million, exceeding analyst expectations. Karp marked this as a turning point, noting that the U.S. commercial segment has reached a “$1 billion run rate,” which he described as the “gold standard” for market validation. Looking ahead, the company expects U.S. commercial revenue to rise 68% in 2025 to $1.18 billion, an increase from the earlier forecast of $1.08 billion. This growth is driven by the growing adoption of its AI Platform (AIP) in industries such as healthcare, manufacturing, and energy. Defense Sector Remains a Core Focus Palantir’s U.S. government revenue jumped 45% to $373 million, bolstered by key contracts such as a $178 million deal with the U.S. Army and a $30 million agreement with ICE. Karp was blunt in his defense strategy, stating the company is "very focused on making America more lethal and in a more efficient way." There could be even more upside ahead. The Trump administration recently proposed a 13% increase in the Pentagon's 2026 budget, with a sharper focus on areas like AI. Reacting to the potential boost, Karp said, "We believe we have a completely differentiated set of offerings." Analysts see the opportunity too. Wedbush analyst Dan Ives noted that Palantir is "well positioned" to benefit from this shift and could earn a "bigger seat at the table" in Washington. AI Demand Fuels Growth Momentum Karp called current AI adoption a "ravenous whirlwind," pointing to how fast demand is rising across sectors. He asserted that Palantir’s growth is “unparalleled,” especially considering the company’s huge size and potential. Karp also noted that Palantir's software is helping drive the "reindustrialization of America," as AI tools become embedded in real-world operations, from factory floors to military systems. Valuation Remains a Concern Even with strong fundamentals and CEO confidence, Palantir's valuation continues to weigh on the stock. It trades at over 200 times estimated earnings, placing it among the most expensive names in the Nasdaq 100 (NDX). As Bloomberg's Mandeep Singh put it, "Even with all the good news, it just wasn't enough to sustain the valuation going forward." Is PLTR a Good Stock to Buy? Turning to Wall Street, analysts have a Hold consensus rating on Palantir Technologies stock based on two Buys, eight Holds, and three Sells assigned in the past three months, as indicated by the graphic below. The average PLTR stock price target is $89.17, implying downside potential of 27.96%. See more PLTR analyst ratings Disclaimer & DisclosureReport an Issue