Palantir’s Commercial Growth Story Is Just Getting Started
Palantir Technologies Inc. (NASDAQ: PLTR) stock is down more than 3% in the 30 days ending September 12. That's not a huge drop, compared to the drop of over 30% that occurred earlier this year. However, it may give some Palantir bulls some pause, as PLTR stock is dropping at a time when the broader market is hitting new all-time highs.
Not all the news is bad for Palantir. Many software companies would like one earnings report as strong as Palantir, which had a Rule of 40 score of 94% in its most recent earnings report. That speaks to the idea that Palantir is generating profitable growth.
That growth comes from the company’s more well-known government business and its commercial business. In fact, the latter has outpaced the company’s government revenue growth in recent quarters:
- February 2025 – Commercial revenue of $214 million was up 64% YOY and 20% from the prior quarter.
- May 2025 – Commercial revenue of $255 million was up 71% YOY and 19% from the prior quarter.
- August 2025 – Commercial revenue of $306 million was up 93% year-over-year (YOY) and 20% from the prior quarter.
The significance of these numbers is that the YOY growth in revenue on the commercial side is increasing in both actual dollars and in percentage terms. This gives heft to Palantir’s vision of becoming “the leading software provider for data-driven decision-making.”
The Bull Case: Palantir as an Operating System
Palantir’s first-mover advantage with the U.S. government was again on display when it won a contract from the U.S. Department of State to support its Orion program. The significance isn’t so much that Palantir won the contract but in the why.
In this case, out of more than 40 companies that were asked to bid, only Palantir’s software offerings met the agency’s requirements for an artificial intelligence (AI) and machine learning solution. Plus, because Palantir’s platform is already compatible with other agencies’ models, it is easy to integrate across a broad user base.
This supports the bullish argument that investors should view Palantir more as an operating system than just a product. That extends beyond the federal government and suggests that the company’s total addressable market (TAM) borders on being unlimited.
That’s why investors are excited about the growth of Palantir’s commercial business. It was only about 25% of the company’s business two quarters ago, but now accounts for over 40%. That growth is coming even as the total pie expands.
The Bear Case: Growth Will Eventually Normalize
The bearish argument is that history suggests the company’s impressive growth will normalize at some point. When that happens, it will be harder to justify the stock’s lofty valuation. This comes down to the law of large numbers that many technology stocks face. That is, as revenues grow, the percentage growth rate naturally slows.
Palantir skeptics say that day is coming, and when it does, the market will compress Palantir’s valuation multiple, which is priced for perfection and then some.
Competition in government and commercial businesses—from large cloud providers to nimble players such as BigBear.ai—adds to the bear case.
Retail Conviction vs. Institutional Caution
It’s fair to say that retail shareholders who continue to hold the stock are confident in Palantir’s future growth.
That growth isn’t guaranteed.
Even if Palantir continues to execute well, the stock could underperform if investor expectations reset to more modest long-term growth.
The real risk isn’t that Palantir fails, but it succeeds at a slower pace than its current price implies.
Palantir’s inclusion in the S&P 500 and the Nasdaq-100 drives institutional interest in the stock.
However, institutional investors aren’t likely to have the same conviction as retail investors, which could mean that the stock will be somewhat volatile in the short term.
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