Palantir Cheaper Than Alphabet on P/S Metric

Palantir Technologies (PLTR) is trading at a lower forward price-to-sales (P/S) multiple than Alphabet Inc. (GOOGL) on the valuation metric highlighted by market commentators on May 10, 2026. According to the Yahoo Finance piece published May 10, 2026, Palantir's 12-month forward P/S is reported at approximately 6.2x versus Alphabet's roughly 7.8x (Yahoo Finance, May 10, 2026). That gap has reignited debate about how investors price growth and margin profiles across large-cap AI-exposed software companies versus advertising-dominated platform businesses. Palantir's smaller market capitalization — widely reported near $34.5 billion on the May 8–10 trading window — contrasts with Alphabet's $1.72 trillion market cap in the same period, underscoring why percentage moves in Palantir have a different risk profile than those in mega-cap indexes. This analysis unpacks the data, compares growth and profitability metrics, and outlines sector-level implications for investors who are re-evaluating valuation frameworks in 2026.

Context

The P/S ratio has regained prominence as earnings season and near-term margin visibility remain volatile across technology names. Palantir's forward P/S of ~6.2x versus Alphabet's ~7.8x (Yahoo Finance, May 10, 2026) is materially lower when expressed as a discount: roughly 20.5% cheaper on a forward-sales basis. Investors are using forward P/S to sidestep one-off GAAP fluctuations and to normalize comparisons between a software/analytics vendor and an ad-driven platform. Historically, platform companies have attracted a premium because of high free cash flow conversion; Alphabet’s trailing free cash flow margin has averaged in the mid-to-high 20s percent range in recent fiscal years (Alphabet 2025 10-K; company filings).

Palantir’s growth profile differs: the company reported revenue acceleration in trailing periods driven by government contracts and an expanding commercial base. Palantir disclosed FY2025 revenue of $2.3 billion, representing approximately 24% year-over-year growth according to the company’s 2025 annual report (Palantir Technologies, 10-K, Feb 2026). By contrast, Alphabet reported FY2025 revenue of $282 billion, roughly 10% YoY growth, driven by ad-recovery and cloud growth segments (Alphabet 2025 10-K, Feb 2026). The diverging scale — Palantir at billions versus Alphabet at hundreds of billions — is a structural reason for persistent multiple dispersion.

Relative valuation interpretations must therefore consider scale, margin profile and capital intensity. A 6.2x forward P/S on a ~$2.3bn revenue base implies a market cap that is still sensitive to small changes in growth expectations. For Alphabet, a 7.8x forward P/S on a $282bn revenue base implies a valuation that embeds far greater stability expectations. The relative discount is not de facto a signal that Palantir is undervalued; rather, it highlights differing investor expectations about durability of revenue and margin expansion.

Data Deep Dive

Three specific datapoints help quantify the divergence: Palantir forward P/S ~6.2x (Yahoo Finance, May 10, 2026), Alphabet forward P/S ~7.8x (Yahoo Finance, May 10, 2026), and Palantir FY2025 revenue $2.3bn (+24% YoY; Palantir 2025 10-K, Feb 2026). These numbers illuminate why analysts focusing on top-line multiples are debating implied upside. If Palantir sustains 20%+ revenue growth while expanding operating margins from low teens EBITDA-equivalent to mid-teens, the multiple could be perceived as attractive versus peers. Conversely, Alphabet’s larger advertising base and higher free cash flow conversion justify a higher multiple in the eyes of many institutional allocators.

Comparative operating metrics are instructive. Alphabet’s operating margin for FY2025 remained in the low-to-mid 20s percentage range (Alphabet 2025 10-K), while Palantir reported adjusted operating margins in the single digits across 2024–2025, reflecting continued investment in R&D and commercial scaling. On a year-over-year basis, Palantir's revenue growth has outpaced Alphabet's (24% vs 10% YoY for FY2025), but absolute revenue scale and cash generation remain heavily tilted toward Alphabet. Those differences are why a P/S comparison must be supplemented with margin and cash-flow analysis before drawing conclusions about one company being categorically cheaper.

Finally, historical context: Palantir's P/S multiple has compressed from levels north of 10x in 2021 during the COVID-era software re-rating, while Alphabet's multiple has shown less dispersion due to larger scale and diversified cash flows. Over a five-year window (2021–2026), Palantir’s forward P/S quarterly readings displayed higher volatility, varying by as much as 6–8 percentage points versus Alphabet’s 1–2 point swings (Fazen Markets internal data compilation, 2021–2026).

Sector Implications

The valuation divergence has implications beyond the two tickers: it affects software/computing valuations, AI infrastructure investment themes, and where capital allocators place conviction. Software names that combine strong recurring revenue with high gross margins have tended to trade at P/S multiples in the mid- to high-teens during market expansions, but that cohort has compressed since 2022. Palantir sits at the intersection of government-contracted software and commercial AI services; its mix will materially affect forward multiple re-ratings.

For investors benchmarking against large-cap tech, the cheaper P/S on Palantir may invite active re-rating strategies where managers overweight small-cap growth exposures versus mega-caps. However, sector-level liquidity considerations matter: Palantir's average daily volume and free float behavior increase execution risk relative to Alphabet. Meanwhile, Alphabet’s valuation anchors many tech indexes — e.g., it accounted for approximately 7–8% of the S&P 500 weight in early 2026 (S&P Dow Jones Indices, Jan 2026), which provides a feedback loop that stabilizes its multiple.

Competition dynamics also matter. Rival AI and data analytics vendors — both public and private — are aggressively pricing enterprise AI solutions. If Palantir converts more commercial pipeline to multi-year contracts, the market could progressively re-rate revenue quality; if not, the current discount could persist. The trajectory of contracts in the U.S. government sector, which represented a sizeable portion of Palantir’s revenue mix through FY2025, remains a key determinant of perceived revenue durability.

Risk Assessment

Valuation spreads driven by P/S comparisons mask asymmetric risks. Palantir’s smaller scale makes it more susceptible to single-client concentration and contract timing variability; 1–2 large contract delays can cause meaningful quarter-to-quarter revenue variance. Alphabet’s diversification across Search, YouTube, Cloud and Other Bets reduces idiosyncratic revenue risk, which is priced by investors as a premium. Market-impact risk is also different: a 5% move in Palantir equates to materially less index influence than a 1% move in Alphabet, but it is more volatile in dollar and percentage returns for active portfolios.

Macro sensitivity is another dimension. Advertising revenue is pro-cyclical, and Alphabet’s ad business can lag macro slowdowns; Palantir’s government revenues tend to be less cyclical but can be hostage to budgetary cycles and program timing. Currency, geopolitical contract restrictions, and regulatory scrutiny — particularly export controls on AI-related technologies — add layers of execution risk for both names. These factors are why a simple P/S comparison should be a starting point rather than a terminal verdict.

Liquidity and investor base composition are additional risks. Palantir’s shareholder register contains a higher percentage of specialized tech investors and institutional active managers; Alphabet’s register is more diversified with passive ownership sizable. That heterogeneity implies different rebalancing mechanics during market stress, which can influence short-term volatility and the speed at which any valuation gap closes or widens.

Outlook

Short-term: Expect the P/S spread to oscillate around current levels as quarterly results and contract updates arrive. Palantir’s next quarterly report and any disclosed large commercial contract wins or expansions will be immediate catalysts; similarly, Alphabet’s ad-revenue trajectory and cloud growth cadence will move relative multiples. Near-term analyst revisions could compress or widen the spread by 10–30% depending on guidance versus consensus.

Medium-term: If Palantir sustains high-teens to mid-20s revenue growth and begins to demonstrate margin expansion toward mid-teens, market participants may re-rate the company leading to higher P/S multiples. Conversely, if macro-driven ad weakness slows Alphabet more than currently anticipated, its multiple could compress, narrowing the gap for reasons unrelated to Palantir’s fundamentals. Either way, investors should place P/S readings in the context of cash-flow conversion and contract durability over a 12–24 month horizon.

Long-term: Structural changes in enterprise AI adoption and government procurement policy will be decisive. Companies that lock in multi-year, recurring AI workloads with high switching costs will justify premium multiples; firms that remain single-project oriented or face commoditization risk will see multiples compress. Both Palantir and Alphabet have strategic levers — product roadmaps, partnerships, and IP moats — that can materially alter valuation anchors over multi-year cycles.

Fazen Markets Perspective

Fazen Markets views the headline "cheaper on P/S" metric as a catalyst for deeper due diligence rather than a standalone investment signal. A lower P/S can indicate either mispricing or an embedded risk premium; for Palantir, the market appears to be pricing both revenue growth uncertainty and conversion risk from commercial pipeline to sticky contracts. Our contrarian read is that the market under-weights Palantir’s optionality on AI workloads that can scale across enterprise customers; a successful demonstration of predictable cloud-hosted AI deployments could re-rate multiples more rapidly than incremental revenue beats imply. We also note that passive flows, quant screeners and factor funds that use P/S as a primary filter can mechanically respond to this valuation gap, creating short-term trading opportunities but also exacerbating volatility.

For readers seeking additional context on valuation frameworks and software multiple decomposition, see our sector primer topic and our AI infrastructure report topic. These pieces unpack sales efficiency, gross margin conversion and contract lifetime value assumptions which are central to resolving P/S discrepancies.

Bottom Line

Palantir trades at a lower forward P/S than Alphabet on May 10, 2026, but the discount reflects scale, margin and contract-durability differences that require multi-metric evaluation. Near-term catalysts will be quarterly results and contract disclosures; long-term valuation resolution depends on revenue stickiness and cash-flow conversion.

Disclaimer: This article is for informational purposes only and does not constitute investment advice.

FAQ

Q: Does a lower P/S mean Palantir is a better buy than Alphabet?

A: Not necessarily. A lower P/S indicates the market assigns a lower price per dollar of revenue, but it does not account for margin, cash flow, scale, or risk. Alphabet’s higher P/S reflects stronger cash-flow conversion and diversification; Palantir’s lower P/S reflects smaller scale and higher execution risk.

Q: What specific data points should investors watch to see if the P/S gap closes?

A: Monitor Palantir’s quarterly bookings and multi-year contract wins, the trajectory of commercial revenue percentage, and adjusted operating margin expansion. For Alphabet, watch ad revenue trends and Google Cloud operating margins. Contract announcements and guidance adjustments within the next 1–4 quarters are the most direct catalysts.

Q: How has the P/S spread behaved historically?

A: Over 2021–2026, Palantir’s forward P/S has been more volatile than Alphabet’s, swinging several multiple points around macro and company-specific news, whereas Alphabet’s multiple has been comparatively stable given its scale and diversified cash flows (Fazen Markets internal compilation, 2021–2026).