Econified

Palantir is a large corporation that utilizes data to help organizations make decisions. Their primary source of revenue is through government contracts, but they also have commercial applications. Palantir is not a B2C organization, so many consumers may be unfamiliar with their operations. Essentially, the organization utilizes AI to better assist its customers. This has made the organization very successful in recent years. In fact, the value of the company stock has increased from just over $9 in October of 2020 to over $170 in October 2025. This means the value of the corporation has increased almost 19x in just 5 years.

According to Palantir’s 2025 3rd quarter earnings report, the earnings per share totaled $0.18. The Price to Equity (P/E) ratio as of November 23rd is reported to be 362.18 with a market cap of $368.91 billion. A P/E ratio is an important metric to see how much a company earns compared to its total value. The higher the P/E ratio, the less the company earns based on its value. A P/E of 362.18 means that at the current amount of earnings, it would take Palantir 362 years to make enough earnings to equal its value. For reference, Palantir is about 10x more valuable than Target. Target had a Q3 net earnings of $689 million. Palantir’s Q3 net income was $476 million, a 36.6% difference from Target’s earnings. This goes to show that this corporation is incredibly highly valued for its earnings.

A primary reason for the high valuation is that Palantir is considered to be a “growth stock”. A growth stock typically has a higher P/E ratio because investors believe the company is growing. As a company grows, the earnings of a company grow as well. A fast-growing company like Palantir will have more income in the future, so investors value the company higher now betting on the future growth. This is very common with the technology industry due to rapid growth and healthy margins.

However, being a growth stock is not accounting for all of the high valuation. Here is a list of other notable growth stocks and their P/E ratios (as of close on November 21, 2025):

• Nvidia (NVDA): 44.31
• Microsoft (MSFT): 33.59
• Alphabet (GOOGL): 29.98
• Tesla (TSLA): 261.59
• Oracle (ORCL): 46.00

The only stock listed that is close to having a P/E ratio similar to Palantir is Tesla, but there is still a large gap there as well. These other corporations are also highly valued and positioned for growth, but Palantir’s valuation cannot be justified on it being a growth stock alone. Looking more into Palantir’s financials, Q3 earnings are up 231% from 2024 to 2025. This amount of growth is incredible and very impressive. This means that the company is over twice as profitable this year as it was last year.

Despite the growth, the P/E ratio is still very high. A P/E ratio of 362 means that investors are pricing Palantir’s growth to continue at the same extreme rate for several more years to come. This is unlikely as growth tends to slow as companies grow bigger and capture more of the market share. Additionally, as growth continues, more money gets put into this stock. This keeps the P/E ratio extremely disproportionate.

The reason for the large discrepancy in earnings and valuation is likely because there is a bubble for the company. While many long-term investors, such as ‘Big Short’ investor Michael Burry, think the whole AI industry is in a bubble, Palantir’s exorbitantly high P/E ratio is definitely a red flag. Jerome Powell, chairman of the Fed, does not believe that we are in an AI bubble because these companies actually have earnings. While it is true that many of these growth companies are making strong earnings. Nvidia, for example, has a valuation equal to 44 years of its earnings. This is high, but strong sustained growth for Nvidia justified that this company may not be in a bubble. However, Palantir’s P/E ratio is exorbitantly higher than Nvidia. Maybe the whole AI industry is not in a bubble, but Palantir is in a bubble.

Recently, Palantir stock has hit hard times as investors have identified that the valuation is untenable. The stock is currently down 13.55% since October 27, 2025. However, the valuation is still at levels too great to sustain. I do not know if this drop is the bubble popping for Palantir. A 13.55% drop in less than a month is a huge drop, but I do not think we have seen the end of the decrease. Palantir will likely continue dropping until the next earnings call. At that point, the earnings call is going to make or break the stock price. The second that the growth slows down in the company, the valuation is going to come tumbling down. As the valuation of the company is already so high, the stock has nowhere to go but down. This is not a stock I would recommend holding in the short-term. This is not to say the organization’s growth is not impressive. Certainly, this stock would be a strong buy if more reasonable valued. The only issue I have with Palantir stock is the company’s valuation on the stock market is unrealistic.