UBS has moved Palantir Technologies into the Buy column, upgrading the software company from a Neutral stance as its share price sits about 35% below recent highs. The bank said the pullback creates a compelling valuation opportunity for investors focused on growth exposed to artificial intelligence and data-driven services.
"We recommend that investors take advantage of this -35% move off the peak for the premier growth story in software and a company that is at the nexus of the two most powerful spending trends - AI and Data," analysts led by Karl Keirstead wrote in the research note announcing the change.
UBS highlighted its valuation framework, noting that at 50x their 2027 free cash flow (FCF) estimates, Palantir now appears "very attractive" when paired with the bank's assumptions for a 70% revenue increase in 2026 and "stable mid-50% margins." The firm pointed to a combination of compressed multiples after the recent price decline and upward estimate revisions as underpinning its more favorable view.
Demand visibility supports UBS's stance. After conducting partner and customer checks, the analysts reported that Palantir is operating in a favorable environment as enterprises accelerate AI adoption. One partner was quoted succinctly, saying "demand is exceptional." These checks led UBS to conclude there is no sign of "any material emerging competition" from hyperscalers, Databricks or AI model providers at this time.
UBS's updated financial modeling calls for a roughly 54% compound annual revenue growth rate over three years through 2028, and it expects non-GAAP margins to remain within a 55% to 60% range. The bank noted Palantir's recent growth has been unusually strong, including a 70% year-over-year revenue increase in the fourth quarter of 2025.
The analysts acknowledged that their earlier caution was prompted by historically high multiples. On 2025 estimates, the stock previously traded at 49x revenue and 124x free cash flow. Following the share price retreat and UBS's upward estimate revisions, the multiple profile has tightened considerably.
"If one assumes that Palantir can grow at a ~50% CAGR for the next 3 years, then the next-year FCF multiple is now down to 1x the projected growth rate," UBS wrote, adding that this level could allow many investors to mount a convincing valuation argument for the shares.
UBS maintained its $180 price target for Palantir. The analysts noted that accelerating growth software companies often outperform over time and that Palantir merits a premium given its exposure to AI, data platforms and modern defense technology. "In our view, it is very likely that investors come back to 'AI winner' stocks such as Palantir in 2026," they added.
Context and implications
The upgrade centers on three interconnected factors UBS believes matter to investors: a sizable decline from peak share prices that has compressed valuation multiples, continued robust demand tied to AI adoption, and model assumptions that forecast sustained high growth and margins through 2028. The bank's stance reflects confidence in the company's ability to translate current demand into durable financial performance under its forecasts.
What UBS continues to watch
UBS flagged the main investor debate as whether 50%-plus growth is sustainable and whether competition from hyperscalers, Databricks or AI model providers might intensify in a way that materially affects Palantir's prospects. The firm's latest checks, however, did not surface evidence of meaningful competitive pressure at this time.