Palantir’s stock surge in 2025, with a nearly 300% increase, has captured the attention of investors and analysts alike. The company’s market capitalisation now stands at approximately $400 billion, driven by heavy demand for its AI solutions from both government and commercial sectors. This rally has been further fuelled by an unexpected but strategic merchandising push, with branded gear for fans adding an unconventional yet effective boost to its market presence.
The UK government’s recent £1.5 billion deal with Palantir marks a significant milestone, solidifying the company’s role as a key player in European defence and AI innovation. The agreement, announced on September 18, 2025, includes the establishment of a London-based European headquarters and the deployment of new AI-enabled defence systems. This partnership, described as a “major vote of confidence” by UK Defence Secretary John Healey, also secured Palantir its largest-ever UK contract—a £750 million deal with the Ministry of Defence over five years. The collaboration is expected to create around 350 new tech jobs in the UK and embed Palantir’s Foundry and Gotham software onto Oracle’s cloud, enhancing both security and sovereignty.
Palantir’s financial performance has been equally impressive, with Q2 2025 revenue jumping 48% year-over-year to $1.03 billion and net income surging 144%. Management has raised its full-year revenue guidance to approximately $4.15 billion, reflecting a 45% increase. The company’s U.S. commercial and government segments are thriving, driven by the widespread adoption of AI software.
Analysts are divided on Palantir’s future prospects. Some predict the company could surpass Oracle in value by 2030, while others suggest semiconductor giants like ASML and AMD could overtake Palantir’s market cap within a year or two. Dan Ives of Wedbush has boldly called Palantir “one of the best AI stocks” and forecasts a $1 trillion valuation by 2028. However, skeptics warn that Palantir’s valuation is already extremely high, trading at over 100 times price-to-sales, one of the highest on the S&P 500. Wall Street’s consensus is a “Hold” rating, with median one-year targets below current prices.
The upcoming Q3 results, scheduled for November 3, 2025, will be closely watched by investors. The company’s guidance implies another quarter above $1.08 billion, but the stock’s pattern suggests potential volatility around earnings.
Palantir’s strategic partnership with the UK government is not just a financial boon but also a geopolitical one. It underscores the growing importance of AI in defence and security, positioning Palantir as a critical player in NATO and EU defence strategies. This move could set a precedent for other Western nations looking to bolster their defence capabilities through advanced AI technologies.
However, the company faces significant challenges. The high valuation multiple raises concerns about sustainability, and any growth hiccups could trigger a sharp correction. Additionally, foreign market dynamics, including EU AI regulations and restrictions in China, could temper growth. Competition in the commercial AI sector is also heating up, with companies like ASML and AMD making significant strides.
In summary, Palantir’s 2025 has been a year of remarkable growth and strategic expansion. The UK partnership has provided a significant boost, but the company must continue to execute and grow to justify its current valuation. As the defence and AI sectors evolve, Palantir’s role in shaping the future of military and commercial AI technologies will be crucial. Investors will be watching closely to see if the company can sustain its momentum and live up to the high expectations set by its recent performance.