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Palantir Technologies (NASDAQ: PLTR) has been one of the biggest winners on the stock market this year. The data fusion specialist is up a whopping 379% year to date as of Dec. 26. The company has established itself as a leader in artificial intelligence (AI) software thanks to its new AI platform, and it's experiencing strong growth in both government contracts and commercial business.

Palantir has now delivered five straight quarters of accelerating revenue growth and eight straight quarters of expanding operating margins, showing that the business is rapidly gaining leverage. Along the way, the company has turned profitable on a generally accepted accounting principles (GAAP) basis and gained admission into the S&P 500 (SNPINDEX: ^GSPC).

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However, Palantir's stock price has grown much faster than the underlying business. As a result, its valuation has ballooned. The stock trades at a sky-high price-to-sales ratio of 75, meaning that extremely high expectations are now priced into Palantir's market value.

Recently, shares have soared following a strong third-quarter earnings report and the election of Donald Trump, which has increased hopes of spending on government defense and intelligence in the next administration, boosting Palantir's bottom line. More recently, investors responded well to news that Palantir was teaming up with defense tech start-up Anduril to start a consortium to bid on defense contracts, challenging traditional leaders like Lockheed Martin, RTX, and Boeing.

In other words, Palantir has soared in large part due to improving sentiment, but in order for the stock to keep climbing or maintain its gains, it will have to continue to accelerate its revenue growth. It will take a long time for the stock to grow into its lofty valuation if revenue growth continues at 30% or slows from there.

Therefore, revenue growth looks like the most important metric driving Palantir's stock price growth. Keep your eye on that metric going forward, as it will likely determine whether the stock continues to climb in 2025.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Lockheed Martin and RTX. 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.