By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panelists collectively express bearish sentiments towards Palantir (PLTR) due to its high valuation, reliance on government funding, and potential compression of growth multiples.
Risk: High valuation and reliance on government funding
Opportunity: None explicitly stated
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Palantir is closing million-dollar deals every day.
ServiceNow recently made several acquisitions to strengthen its AI-powered software.
One of these companies has a clear advantage.
Numbers are important when investing. We're all working toward building our nest eggs to achieve comfortable retirements or put other important financial goals within reach. And numbers -- such as your rate of return on investment and the total amount of money you have socked away -- are the clearest gauge of how you're doing.
But here's the part that not everyone says out loud: Sometimes, the raw numbers don't tell the whole story. Take, as an example, the valuations of two software companies that are embracing artificial intelligence -- Palantir Technologies (NASDAQ: PLTR) and ServiceNow (NYSE: NOW). Palantir's software helps businesses and government agencies (including the military) achieve broad goals, while ServiceNow uses AI to help its customers manage human resources and customer service, and coordinate business processes.
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ServiceNow trades at a forward price-to-sales ratio of 6, meaning the stock's market capitalization is 6 times the revenue investors expect the company to earn in the coming year. Palantir, meanwhile, trades at a much frothier forward P/S of 42.
So, based on those numbers, you would think that ServiceNow would be the better investment, right? That conclusion couldn't be further from the truth.
First, let's take a look at Palantir. It's an important government contractor, providing platforms that can collect countless data points across a wide array of systems, and help find patterns in them. Palantir leverages its broad reach and AI-enabled decision-making to deliver real-time analytics and actionable insights to intelligence agencies and military commanders.
The Pentagon is requesting $2.3 billion to expand its use of Palantir's Maven Smart System, an AI-powered platform that supports AI-enabled targeting and analyzes battlefield data. And it is planning to label Maven an "official program of record," which will streamline its use over all branches of the military and secure long-term funding for Palantir.
But there are many other uses for Palantir in government work. Its platform was also used by the now-defunct Department of Government Efficiency (DOGE) and is being used by Immigration and Customs Enforcement, the State Department, Homeland Security, and the Internal Revenue Service. Palantir's revenue from U.S. government contracts was $687 million in the first quarter, up 84% from a year earlier.
And its commercial business is growing even faster. Palantir's platform helps companies manage workflows, inventory, and supply chains, and provides competitive analysis. The company's U.S. commercial revenue was $595 million in the first quarter, up a whopping 133% from a year earlier. In the quarter, Palantir reported closing 206 deals worth more than $1 million, of which 47 were valued at more than $10 million.
Palantir guided for Q2 revenue to be in the range of $1.797 billion to $1.801 billion, and raised its full-year guidance from a range of $7.182 billion to $7.198 billion to a range of $7.650 billion to $7.662 billion.
I doubt that it will be the last time Palantir boosts its guidance in 2026.
ServiceNow is a software-as-a-service (SaaS) company for IT service management, customer service, and human resources. The company's AI platform is designed to be an all-in-one solution that can gather data, analyze, provide AI-powered solutions, and act on those decisions.
It's also expanding its reach. Late last year, it completed its acquisition of MoveWorks, which offers an agentic AI platform that uses large language models to allow users to find information and automate tasks in their business systems. It also bought Veza, a cybersecurity company that specializes in identity security, and it purchased Pyramid Analytics to expand its AI and natural language capabilities.
Revenue in the first quarter was $3.77 billion, up 22% from the prior-year period. Net income was $469 million, or $0.45 per share. However, subscription revenue growth slowed in the quarter as several deals the company expected to close with clients in the Middle East were delayed due to ongoing military conflicts.
The company issued second-quarter guidance calling for 22.5% year-over-year growth in subscription revenue, to a range of $3.815 billion to $3.820 billion.
Both companies are on the rise, to be sure. And I don't expect the global headwinds affecting ServiceNow to be a long-term problem. But ServiceNow's growth cannot compare to the massive opportunity Palantir has in front of it. This company is closing million-dollar deals every day, on average, and closed $4.262 billion in total contract value in the first quarter, up 138% from a year prior.
Look at it this way. Palantir's $4.47 billion in 2025 sales was a 56% increase from 2024 -- huge growth. And its revenue growth is expected to accelerate this year to 72%, after which the top line is forecast to rise by another 44% in 2027 to $11.17 billion.
ServiceNow is a fine company in its own right, with 21% revenue growth in 2025 to $13.28 billion. But while Palantir is soaring, ServiceNow is expected to clock just 22% revenue growth this year and 18.4% growth in 2027 to a total of $19.19 billion.
That's why Palantir stock is worth the hefty premium, in my view. It remains a core holding in my portfolio, and that's not going to change any time soon.
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Patrick Sanders has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies and ServiceNow. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Palantir's valuation assumes perpetual hypergrowth that historical SaaS patterns and competitive AI dynamics make unlikely to materialize without major setbacks."
The article correctly flags Palantir's 72% expected 2026 revenue growth and $4.26B Q1 TCV as exceptional, but ignores that 42x forward sales prices in flawless execution for years. ServiceNow's 6x multiple reflects mature 20%+ growth with 30%+ operating margins and sticky enterprise contracts, while Palantir's commercial segment still faces long sales cycles and potential budget scrutiny in government work. Acquisitions by NOW (MoveWorks, Veza) directly bolster its AI moat without the valuation risk. Historical software multiples show compression once growth drops below 30%.
If Palantir sustains 40%+ growth into 2028 with expanding margins and wins additional defense programs of record, the premium could prove justified as the market rerates it toward other high-growth AI platforms.
"A 42x forward P/S is justified only if PLTR sustains 60%+ revenue growth for 3+ years; the article provides no margin of safety if growth even moderates to 40%."
The article conflates growth rate with valuation merit—a classic trap. Yes, PLTR's 72% expected 2026 revenue growth crushes NOW's 22%, but the 42x forward P/S already prices in that acceleration. The real question: does PLTR's growth sustain at 44% CAGR through 2027, or does it normalize? ServiceNow's 6x P/S on 22% growth implies a 3.7x PEG ratio; PLTR at 42x P/S on 72% growth implies a 2.3x PEG—better, but only if execution holds. The article ignores profitability: PLTR was unprofitable until recently; NOW generates $469M quarterly net income. Government concentration risk (PLTR's $687M Q1 revenue, 54% of total) also goes unmentioned—policy shifts or budget cuts could crater guidance.
PLTR's government revenue growth of 84% YoY is unsustainable if Maven becomes 'official program of record'—that actually signals maturation and slower incremental growth, not acceleration. Meanwhile, NOW's Middle East deal delays are temporary headwinds, not structural.
"Palantir's current valuation of 42x forward sales creates an asymmetric downside risk that ignores the inherent volatility of lumpy, project-based government revenue."
The article presents a classic growth-at-any-price trap. While Palantir (PLTR) is seeing impressive momentum in U.S. commercial adoption and government contract expansion, a 42x forward P/S ratio is detached from historical software valuation norms. Even with 72% projected growth, the margin for error is razor-thin; any deceleration in AIP (Artificial Intelligence Platform) adoption or a contraction in government spending will lead to a brutal multiple compression. ServiceNow (NOW) offers a more durable, predictable compounding story at 6x forward sales. Investors are essentially choosing between a high-beta, speculative growth play and a mature, enterprise-essential platform with clearer path-to-profitability metrics.
If Palantir successfully transitions into the 'operating system' for the entire U.S. defense apparatus, the 42x multiple may actually be a discount relative to its future total addressable market.
"Palantir’s extreme forward-sales valuation depends on highly leverageable government-driven growth that is vulnerable to budget volatility and deal timing; any deceleration could trigger sharp multiple compression."
The piece highlights Palantir at 42x forward sales versus ServiceNow at 6x, but a high multiple isn’t evidence of safety—it's a hedge on extremely optimistic growth. Palantir’s moat depends on volatile government funding and multi-year deals that can stretch, delay, or disappoint. Maven’s status as an official program of record is not guaranteed to scale across DoD branches, and commercial growth, while rapid, may slow as AI adoption matures in enterprise clients. The article glosses over profitability, margins, and the risk that the growth path accelerates only if AI-driven adoption remains robust. All told, the upside hinges on a perfect storm of defense budgets and aggressive deal closes, not a given outcome.
Bull case: Palantir could secure durable, multi-year funding from expanding Maven deployments and broader government use, driving stickier revenue and potentially re-rating the stock even from a high base.
"PLTR's smaller revenue base plus rate sensitivity creates faster multiple compression risk than PEG ratios suggest."
Claude's PEG framing treats the growth rates as directly comparable, but ignores base effects: PLTR's 72% must scale from far smaller absolute revenue than NOW's 22%, making the implied multiple sustainability fragile. A clearer risk is macro-driven compression—rising rates hit high-multiple, lower-margin growth names like PLTR harder than NOW's cash-flow positive profile, independent of Maven or AIP execution.
"Maven as program of record may accelerate revenue but doesn't necessarily expand addressable market—a critical distinction the panel hasn't resolved."
Grok's base-effect critique is sharp, but it actually strengthens Claude's PEG math rather than weakening it. If PLTR's 72% growth is harder to sustain from a larger base, that argues for *faster* multiple compression, not slower. The real gap: nobody's quantified how much Maven scaling actually expands TAM versus just consolidating existing government spend. That distinction determines whether 42x is priced for new markets or just faster penetration of existing ones.
"Palantir's valuation metrics are misleading because they fail to account for the massive impact of stock-based compensation on true shareholder value."
Claude, your PEG math is flawed because it treats PLTR’s growth as linear. You’re ignoring stock-based compensation (SBC), which remains a massive drag on PLTR’s GAAP profitability compared to NOW’s mature margins. At 42x sales, you aren't just paying for growth; you're paying for a future where SBC becomes a rounding error. If that dilution doesn't stabilize, the 'value' you see in the PEG ratio is an illusion created by ignoring the dilution of shareholder equity.
"DoD budget volatility and uncertain Maven scaling pose bigger downside risks than SBC dilution, potentially driving multiple compression even with high growth."
Gemini overplays SBC as the alpha in valuation. Yes, dilution matters, but the bigger, underappreciated risk is DoD budget cyclicality and Maven’s actual scale. A few large awards or a delay in program-of-record funding can crush revenue visibility for years, hardly captured by a 72% growth trajectory. A 42x forward sales multiple is priced for near-perfect execution; any lag in government demand or policy shifts could trigger brutal multiple compression.
The panelists collectively express bearish sentiments towards Palantir (PLTR) due to its high valuation, reliance on government funding, and potential compression of growth multiples.
None explicitly stated
High valuation and reliance on government funding