TLDR
- Palantir stock fell 7.6% to $164.89 in Tuesday premarket trading after earnings.
- Q3 revenue rose 96% to $2.3 billion, and adjusted earnings were 44 cents per share.
- U.S. commercial revenue topped U.S. government revenue for the first time.
- Q4 revenue guidance of $2.65 billion is well above the $2.46 billion expected.
- U.S. commercial contract value growth slowed to 11%, and valuation remains in focus.
Palantir (PLTR) stock fell 7.6% to $164.89 in Tuesday premarket trading, even after a third-quarter beat. It closed Monday at $178.34.
Palantir Technologies Inc., PLTR
Adjusted earnings came in at 44 cents per share, above the 40 cents analysts expected. Revenue rose 96% from a year ago to $2.3 billion, topping the $2.2 billion forecast.
U.S. commercial revenue passed U.S. government revenue for the first time. It jumped 148% to $984 million, the fifth straight quarter of triple-digit growth.
The company guided fourth-quarter revenue to $2.65 billion, versus the $2.46 billion analysts expected. Adjusted operating income is seen at $1.64 billion, compared with the $1.43 billion Wall Street wanted.
What Drove the Quarter
CEO Alex Karp credited demand for “sovereign AI,” where organizations keep more control of their AI models. Revenue growth has sped up every quarter since the third quarter of 2023.
Karp said on the call that the U.S. market for Palantir is “insatiable.” He added that model providers like Anthropic and OpenAI are helping the market grow.
Sovereign AI boot camps have sped up deployments and filled the sales pipeline. Karp described the sales pace as a “first date into bed” kind of thing, which is one way to put it.
Annualized U.S. commercial revenue per customer hit about $5.7 million. That is up roughly 20% from the prior quarter and 90% from a year ago.
Some pilots grew 5 to 15 times in annual contract value. A global athletic company went from $1.6 million to about $21 million, and a home appliance company went from $1 million to $15 million.
Soft Spots and Valuation
International revenue rose 26%, a much slower pace than the rest of the business. Karp has become a lightning rod in those markets.
U.S. commercial total contract value was $1.5 billion, up 11%, versus 153% growth last quarter. Remaining deal value was $6.5 billion, up 79%, against 124% before.
Palantir tied part of the slowdown to shorter contracts, as sovereign AI customers start with brief engagements. Deals under 12 months are not captured in remaining performance obligations.
Before earnings, the stock traded at 81 times projected earnings for the next 12 months. It has stagnated this year on valuation worries and fears that AI tools could disrupt software businesses.
D.A. Davidson analyst Gil Luria kept a Buy rating with a $250 price target. Truist also raised its target to $250, and Piper Sandler lifted its target to $235.
Goldman Sachs reiterated Buy with a $235 target on Tuesday, noting revenue came in 7% above consensus. Total revenue growth sped up to 96% from 93% in Q2, and 2026 revenue guidance was raised to 5% above Street estimates.
