Palantir Technologies delivered another blockbuster quarter on Monday, with revenue almost doubling and forecasts raised yet again. The stock still fell. The reaction shows how demanding investors have become of artificial intelligence companies, even when the numbers beat expectations by a wide margin.
A record quarter
Third-quarter revenue rose 96% year on year to $2.3 billion, and Palantir raised its full-year revenue forecast to between $8.53 billion and $8.534 billion, about 91% growth, from as high as $8.2 billion a quarter ago. The result beat analyst estimates of about $2.18 billion. It was the first time quarterly revenue topped $2 billion.
Profitability moved in step. Adjusted and GAAP earnings per share were 44 cents, compared with 21 cents adjusted a year earlier. GAAP operating margin reached 47%, up from 33% a year ago. The company also raised its adjusted operating income guidance to between $5.245 billion and $5.249 billion, and its adjusted free cash flow guidance to between $4.8 billion and $5.0 billion.
Commercial overtakes government
The most striking detail was the change in the mix. US commercial revenue grew 148% to $984 million, and for the first time in the company’s history it exceeded US government revenue, which came in at $953 million. Palantir was founded to serve intelligence and defence agencies, so the shift marks a turning point toward corporate customers adopting its AI tools.
Chief executive Alex Karp was characteristically bold. In his letter to investors he wrote that it would be an understatement to call the results extraordinary, and described the 96% growth rate as absolutely striking.
Revenue from the top 20 customers rose 76% year on year to $146 million per customer. That suggests existing clients are expanding their use rather than simply experimenting.
The outlook
For the current quarter, Palantir forecast revenue of roughly $2.64 billion to $2.65 billion, about 88% growth at the midpoint. That would be a slight slowdown from the third quarter’s pace, though still well above what most software companies can achieve.
Why the shares fell
Investors zeroed in on what the headline numbers did not show. Palantir closed $2.918 billion in total contract value during the quarter, up just 6% from a year earlier, while commercial contract value rose 11% compared with more than 153% in the prior quarter. Contract value is a forward-looking measure, so a sharp deceleration raises the question of whether growth can stay this strong.
Valuation added to the caution. One analysis noted that the stock trades at roughly 230 times forward earnings, a level analysts consider a risk. At that price, even small disappointments can trigger sell-offs.
The wider market mood also played a part. Shares rose about 1.5% right after the figures, then dropped 3.6% amid a spreading AI selloff in other tech stocks. The stock had already closed down 3.13% at $178.34 in regular trading on Monday.
What it means for the AI trade
Palantir has become a bellwether for enterprise AI, and its results offer a mixed message. Demand for software that connects language models to real business data appears strong, and companies seem willing to pay. But the market is no longer rewarding growth alone. It wants evidence that growth is durable, that margins hold up, and that new deals are accelerating rather than slowing.
Competitors will be watching too. Larger technology firms are pushing their own AI platforms into the same corporate accounts, and some analysts see competition from frontier model developers as a long-term variable. For Palantir, the challenge will be turning a surge in revenue into a lasting pipeline of contracts.
Next steps
Investors will look for signs of a bookings recovery in the fourth quarter, along with continued growth in US commercial customers. They will also watch for any change in tone from management about sales cycles. In the meantime, the company has demonstrated that AI demand is translating into real revenue. Whether that is enough to satisfy a market that has become much more selective is a question the next report will help answer.
