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Palantir (NASDAQ: PLTR) stock experienced a sharp pullback after the company posted its earnings for the third quarter of 2025 on Monday night (3 November) and UK investors have been aggressively buying the dip. Looking at data from AJ Bell, it’s the most bought stock on the platform over the last day.
Now, I’ve had this artificial intelligence (AI) stock on my watchlist for ages but I’ve never actually pulled the trigger and bought it for my portfolio. Should I follow the crowd and buy it now? Let’s discuss.
Unbelievable Q3 earnings
Palantir’s Q3 results were truly unbelievable. For the quarter, revenue was up an incredible 63% year on year to $1.18bn. Adjusted earnings per share (EPS) was $0.21, more than double the figure in Q3 2024. Meanwhile, the company’s ‘rule of 40’ score (revenue growth plus profit margin) was 114 – that’s literally unheard of.
Driving this mind-blowing growth was the company’s US commercial segment. Here, revenue was up 121% year on year to $397m, signalling that US businesses are scrambling to adopt Palantir’s AI technology. US government revenue growth remained strong however, at 52%.
“These are arguably the best results that any software company has ever delivered.”
Palantir CEO Alex Karp
Just getting started
Looking at these numbers, one thing’s very clear. This company is the real deal when it comes to AI. I was impressed with its growth rate last quarter, which was 48%. The fact that this has accelerated to 63% suggests that the company has AI solutions that are truly best in class.
What’s interesting is that in the quarterly letter to shareholders, its CEO said that the company is just getting started.
I think he may be right because of the $1.18bn in revenue for Q3, $883m came from the US. In other words, there could still be huge potential in Europe, Asia, and other areas of the world.
Does the stock look attractive?
So we have a brilliant company here. But a brilliant company doesn’t always translate to a winning investment so what does the stock look like? Well, this is where things get complex.
You see, Palantir has an insanely high valuation today (even after its pullback). At present, it trades on a forward-looking price-to-earnings (P/E) ratio of 209 and a forward-looking price-to-sales ratio of about 58 (these figures use sales and earnings estimates for 2026).
These valuations add a ton of risk to the investment case because they’re so high. For reference, Nvidia trades on multiples of about 30 and 13 right now.
Note that a lot of professional analysts have problems with the valuation. On Wall Street, several firms have price targets below $70. Personally, I’d be willing to pay a premium for this company because of its growth. But I can’t justify a price-to-sales ratio of 58.
That kind of ratio assumes that growth will keep ticking along at current rates for years. And I think that’s unlikely (although it could happen).
My move now
Given the sky-high valuation, I’m going to leave Palantir on my watchlist for now. I’m keen to buy it for my portfolio, but I think I’ll get better opportunities in the months ahead.
