Palantir (PLTR) Stock: Shares Plunge 14% Despite Record Q3 Performance

TLDR

• Palantir posted Q3 revenue of $1.18 billion, marking 63% year-over-year growth
• Stock fell 14% after earnings as investors worry about AI bubble and extreme valuation
• U.S. commercial segment exploded 121% while government revenue grew 52%
• Company closed 204 million-dollar-plus deals and signed $2.76 billion in contracts
• Trading at 137x sales ratio despite strong execution raises profitability concerns

Palantir Technologies shares dropped 14% in the week after releasing third-quarter earnings on November 4. The decline came despite posting results that exceeded Wall Street expectations.

Palantir Technologies Inc., PLTR

The AI and data analytics company reported revenue of $1.18 billion for the quarter. That represents 63% growth compared to the same period last year. Net income jumped 40% to $475.6 million, while adjusted earnings per share reached $0.21.

The U.S. commercial business led growth with revenue surging 121% to $397 million. Government revenue climbed 52% to $486 million. CEO Alex Karp noted the company now generates more quarterly profit than it used to produce in total revenue.

Deal Activity Reaches New Heights

Palantir closed 204 deals valued above $1 million during the quarter. That included 91 deals worth over $5 million and 53 exceeding $10 million. Total contract value reached $2.76 billion, with U.S. commercial clients contributing $1.31 billion.

The company issued guidance for Q4 revenue between $1.327 billion and $1.331 billion. Full-year revenue is projected to land between $4.396 billion and $4.4 billion.

Palantir’s Artificial Intelligence Platform has driven much of the recent success since launching in mid-2023. The platform helps customers analyze data with minimal training, attracting both commercial and government clients.

Valuation Metrics Spark Investor Concern

The stock trades at a price-to-earnings ratio of 623 and a forward P/E of 217. More troubling for some investors is the price-to-sales ratio of 137. The industry average for application software companies sits at just 8.8.

Freedom Capital Markets analyst Almas Almaganbetov raised his price target from $125 to $170 but maintained a Sell rating. He acknowledged strong U.S. market traction and faster-than-expected AI adoption. However, European growth remained flat.

The analyst warned that U.S. commercial growth may cool after this exceptional year. Government budgets could tighten, and ongoing AI talent hiring may pressure margins. He believes the stock price already assumes years of strong performance.

CEO Defends Company Performance

Wall Street remains divided. The consensus rating is Hold with 11 Hold ratings, three Buys, and two Sells. The average price target of $187.87 implies 9.14% upside potential.

The stock remains up 127% year-to-date despite the recent pullback. Rising defense spending and AI software demand continue to drive interest. The company reported a 51% adjusted operating margin for the quarter.

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