The AI software giant delivered blowout earnings but faced a sharp sell-off over valuation worries.
Palantir Technologies (PLTR) posted one of its strongest quarters to date, surpassing Wall Street expectations across nearly every metric. Yet, despite record results and raised guidance, the stock dropped as investors fretted over sky-high valuations and profit-taking after a powerful yearlong rally.
Key Points
- Q3 earnings and revenue beat estimates, with adjusted EPS at $0.21 and revenue at $1.18 billion.
- U.S. commercial sales surged 121%, helping total U.S. business grow 77% year over year.
- The company guided for Q4 revenue of $1.33 billion and an adjusted operating margin of 52%.
Record Growth Highlights Palantir’s Expanding AI Footprint
Palantir reported third-quarter revenue of $1.18 billion, up 63% from a year ago and comfortably above the $1.09 billion analysts expected. Adjusted earnings per share came in at $0.21, up from $0.10 last year — a 110% increase.
CEO Alex Karp called the performance “arguably the best results that any software company has ever delivered,” citing soaring U.S. commercial adoption and continued strength in government contracts. The company has now beaten revenue estimates for 21 straight quarters.
U.S. commercial sales grew 121%, reaching $397 million, while government revenue climbed 52% to $486 million. Palantir’s AI platform (AIP) continues to drive strong enterprise adoption, with management noting customers are scaling across full organizations rather than testing limited pilot programs.
Why Did the Stock Drop After Such Strong Results?
Despite the stellar report, Palantir’s shares fell over 6% on Tuesday following a 170% gain earlier in the year. Analysts attributed the pullback to valuation concerns. With a forward price-to-earnings ratio above 230 and a price-to-sales multiple near 100, many investors see little margin for error.
The company’s modest $100 million increase in free cash flow guidance — smaller than prior quarters’ $200 million raises — also contributed to mixed sentiment. Some investors appeared to use the post-earnings rally as an opportunity to take profits.
Adding to volatility, hedge fund manager Michael Burry disclosed a large bearish bet against Palantir through put options valued at $912 million. CEO Alex Karp dismissed the move as “crazy,” arguing that “the two companies he’s shorting — us and Nvidia (NVDA) — are the ones making all the money.”
Is Palantir Still a Good Investment?
Palantir now projects fourth-quarter revenue of about $1.33 billion, above Wall Street’s $1.19 billion forecast, and expects an adjusted operating margin of 52%. The company remains highly profitable, with a 40% GAAP profit margin — double last year’s level.
Management highlighted record bookings and a growing backlog, with remaining deal value up 91% year over year. The firm’s Rule of 40 score — a metric combining growth and profitability — reached 114%, well above industry norms.
For long-term investors learning the basics of investing or seeking companies that are good to invest in, Palantir offers a mix of strong financial growth, deep U.S. government ties, and rapidly expanding commercial adoption. However, its valuation remains extreme — a key factor to analyze for anyone looking to buy or analyze stocks for the long run.
What It Means for Investors
Palantir’s fundamentals are among the strongest in the AI sector, combining high growth, expanding margins, and robust demand from both government and private clients. Its AI-driven software is being adopted at scale, and management expects continued triple-digit growth in U.S. commercial sales.
Still, the stock’s rich valuation and growing skepticism from investors like Burry highlight the risks of buying into the AI boom at peak optimism. For those focused on investment news and best company investments, Palantir’s story illustrates the balance between high growth potential and valuation discipline.
In short, the company is performing exceptionally — but its stock may have already priced in much of that success.
Conclusion
Palantir’s third-quarter results reinforce its position as a major player in artificial intelligence and data analytics. The company continues to deliver outstanding growth and profitability metrics. However, investors should weigh its elevated valuation and potential for market pullbacks before labeling it one of the best stocks to buy right now.
FAQs
Why did Palantir’s stock fall after strong earnings?
Despite exceeding forecasts, shares declined due to concerns about high valuation and smaller-than-expected increases in free cash flow guidance.
How much did Palantir’s revenue grow in Q3?
Revenue rose 63% year over year to $1.18 billion, beating Wall Street expectations.
What is driving Palantir’s growth?
Explosive demand for its AI platform (AIP) and U.S. commercial contracts, along with steady government business, are fueling strong performance.
What are Palantir’s projections for Q4?
The company expects $1.33 billion in revenue and a 52% adjusted operating margin, both above analyst consensus.
Why is Palantir considered overvalued by some analysts?
Its shares trade at a forward P/E above 230 and P/S near 100 — multiples that many analysts believe are unsustainable, even with strong growth.
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