PLTR Analysis: Palantir's Q4 Blowout Delivers 43% Net Margins and $2.1 Billion in Free Cash Flow — But the Pentagon's Anthropic Ban Adds a New Risk Layer

Palantir's valuation defies conventional metrics. At $137.19 per share, the stock trades at 174x trailing PE, 302x price-to-sales, and 555x price-to-free-cash-flow. The enterprise value-to-EBITDA ratio sits at 727x on Q4 numbers. By any traditional yardstick, this is one of the most expensive large-cap stocks in the market.

But Palantir isn't a traditional company. Revenue grew from $884 million in Q1 to $1.41 billion in Q4 — a 59% sequential acceleration across just four quarters. The full-year 2025 revenue of approximately $4.48 billion represents a step-change from the $2.23 billion earned in FY2024. At a PEG ratio of 5.8, the stock is pricing in sustained hypergrowth well beyond current estimates.

The price-to-book ratio of 57x reflects the asset-light nature of Palantir's software model. The company's book value of $3.14 per share consists primarily of cash, with zero tangible goodwill and virtually no debt. This means the vast majority of Palantir's value is in its intangible competitive advantages — namely its government relationships, security clearances, and the network effects of its Ontology and AIP platforms.

Analysts maintain a "Moderate Buy" consensus across 28 firms covering the stock, with 15 buy ratings, 10 holds, and 2 sells. The stock's 50-day moving average of $161 suggests some near-term technical support has been lost, but the 200-day average at $162 tells a similar story — this pullback has taken the stock meaningfully below its trend.

Palantir's Q4 2025 results represent the culmination of a remarkable year of operational improvement. Revenue of $1.41 billion grew 19% sequentially from Q3's $1.18 billion. Gross profit reached $1.19 billion at an 84.6% margin — the highest in the company's history.

Operating income hit $575 million in Q4, a 40.9% operating margin that's more than double the 19.9% posted in Q1. This margin expansion is being driven by operating leverage as revenue scales faster than headcount and infrastructure costs. Selling, general & administrative expenses of $472 million represented just 33.5% of revenue in Q4, down from 45.3% in Q1.

EPS for Q4 came in at $0.24 diluted, bringing the full-year total to approximately $0.63. Notably, stock-based compensation as a percentage of revenue declined from 17.6% in Q1 to 14% in Q4 — a trend that, if sustained, would meaningfully close the gap between GAAP and adjusted profitability. Total SBC for FY2025 was $684 million against $4.48 billion in revenue, compared to $692 million in SBC against $2.23 billion in FY2024 revenue.

Palantir's balance sheet is among the cleanest in enterprise software. The company holds $7.2 billion in cash and short-term investments against just $413 million in total debt, yielding a net cash position of approximately $6.8 billion. The current ratio of 7.1x provides extraordinary liquidity cushion.

Free cash flow generation has been the standout story. FY2025 produced $2.1 billion in FCF on a capital expenditure base of just $34 million — a 98% FCF conversion rate on operating cash flow. This minimal capital intensity is remarkable: Palantir spends less than 1% of revenue on capex, compared to 10-20% for most enterprise software companies.

The debt-to-equity ratio of just 0.056 means Palantir is essentially unlevered. Interest coverage is technically infinite since the company has no interest expense and earns $63 million per quarter in interest income on its cash holdings. Return on equity of 8.2% in Q4 is relatively modest given the stock's premium, but this reflects the massive cash balance inflating the equity base rather than poor capital allocation.

The 115% U.S. commercial growth guidance that Palantir provided alongside Q4 results is the most significant data point for the bull thesis. It suggests AIP — Palantir's artificial intelligence platform that allows enterprises to deploy large language models on their proprietary data — is transitioning from pilot deployments to full-scale enterprise rollouts.

Palantir's competitive moat rests on three pillars. First, its Ontology data model creates a digital twin of an organization's operations that becomes more valuable as more data and workflows are integrated — a classic network effect. Second, its security clearances and government relationships (spanning U.S. Defense, Intelligence, and allied governments) create barriers to entry that take decades to replicate. Third, AIP's "bootcamp" go-to-market strategy — intensive, multi-day engagements where Palantir engineers help customers build their first AI applications — creates high switching costs and rapid time-to-value.

The Anthropic supply chain risk is the newest competitive consideration. Following Defense Secretary Hegseth's designation of Anthropic as a supply chain risk, Palantir may need to replace Anthropic's Claude model in its government-facing AI deployments. Palantir holds billions in defense contracts and cannot afford to jeopardize its government business. The company will likely pivot to alternative AI providers (OpenAI, Google, or open-source models) for classified workloads, but any transition period introduces execution risk and potential capability gaps.

Wall Street estimates project Palantir to reach approximately $4.6 billion in revenue by FY2028, with EPS of $0.85. This implies roughly 26% annualized revenue growth from FY2025's $4.48 billion — a significant deceleration from the current 59% quarterly run rate but still robust for a company of this scale.

At the current $314 billion market cap, the stock trades at 68x estimated FY2028 revenue and 161x estimated FY2028 earnings. Even using the most optimistic estimates ($4.74 billion high-end revenue, $0.88 high-end EPS), the valuation demands sustained hypergrowth and continued margin expansion well beyond 2028.

Key catalysts to watch include the next earnings report on May 4, 2026, which will provide the first look at whether the 115% commercial growth guidance is on track. Additionally, any new large government contracts — particularly in defense AI applications — could serve as near-term catalysts. On the risk side, the Anthropic partnership disruption, potential government spending cuts, and the broader AI bubble narrative all represent headwinds.

The stock sits 34% below its $207.52 all-time high and 15% below both its 50-day and 200-day moving averages, suggesting the recent selloff has been driven by valuation compression rather than fundamental deterioration.