Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Trader Strategy
Global Head of Investment Strategy
Palantir Technologies has once again defied expectations, delivering a standout Q4 earnings report that sent its stock surging 23% in after-hours trading. The company, once known primarily for its secretive government contracts, has firmly positioned itself at the center of the AI revolution, riding a wave of demand from both private enterprises and the U.S. government. The company now finds itself at the intersection of some of most powerful themes shaping markets today – AI, defense technology, and Trump 2.0.
For investors, the big question is: How much of this momentum is sustainable, and how much is already baked into the stock price?
More than the numbers, what stood out was the shift in where Palantir’s growth is coming from. For years, Palantir was seen as a defense contractor wrapped in Silicon Valley branding, with much of its revenue dependent on U.S. military and intelligence agencies. That part of the business remains strong, with government revenue rising 45% in Q4. However, the real surprise is the commercial side, where U.S. sales jumped 64%, a sign that businesses are increasingly turning to Palantir’s AI solutions.
CEO Alex Karp described the AI opportunity as “untamed organic growth,” a phrase that captures both the excitement and unpredictability of this technological wave. Like a river bursting its banks, AI is flooding into every industry, and Palantir is positioning itself as a critical tool for companies trying to stay ahead of the current.
At the heart of Palantir’s momentum is its Artificial Intelligence Platform (AIP), which is designed to help companies integrate large-scale AI models into their operations. In a world where businesses are scrambling to understand how to use AI effectively, Palantir is increasingly seen as a translator—turning complex AI models into actionable insights. Meanwhile, its government contracts remain rock-solid, with the U.S. military and intelligence community deepening their reliance on Palantir’s software.
Politics may also play a role in Palantir’s trajectory. With Donald Trump returning to office, the company stands to benefit from a government-wide push for increased defense spending and AI-driven efficiency initiatives. Palantir’s leadership has made no secret of their belief that Trump’s policies will favor their business, with Karp describing government disruptions as opportunities for those who know how to navigate them.
Palantir has raised its full-year 2025 revenue forecast to between USD 3.74 billion and USD 3.76 billion, well above analysts’ previous estimates. The company also expects U.S. commercial revenue to grow another 54% this year. Free cash flow projections also remain strong, giving the company ample resources for expansion.
Despite its strong performance, Palantir’s valuation is a concern. The stock trades at a staggering 170 times forward earnings, far above tech giants with similar growth rates. That means any sign of slowing growth could trigger sharp volatility. Insider selling is also raising eyebrows. CEO Alex Karp and co-founder Peter Thiel have collectively sold billions in shares, raising concerns about whether those closest to the company believe the current valuation is sustainable.
Competition is another risk. The AI space is heating up, with open-source models and international players like China’s DeepSeek R1 threatening to disrupt the market. Palantir may be ahead today, but in a rapidly evolving landscape, staying ahead is the real challenge.
With Palantir’s stock already at record highs, investors should keep a close eye on a few key factors:
Palantir’s Q4 results confirm that the company is firing on all cylinders, benefiting from booming AI demand, strong government contracts, and expanding commercial adoption. But with a sky-high valuation and increasing competition, the road ahead may not be as smooth as in the past.
With expectations this high, volatility is almost certain. Whether the company can continue defying gravity – or whether its stock will need a reality check – will be one of the biggest market stories in the months ahead.