Palantir Technologies (NASDAQ: PLTR) delivered strong earnings, nearly doubled its revenue and reached an important milestone in its U.S. business. Even so, PLTR stock fell to nearly three-month lows after the report.
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And unfortunately, the answer comes down to expectations. Investors want more than impressive results from an artificial intelligence company attracting this much attention. They also want evidence that its rapid growth can continue.
Some of Palantir’s contract numbers raised questions about that outlook. Still, several Wall Street analysts believe the company has plenty of room to expand.
The Business Is Growing Quickly
Palantir reported third-quarter adjusted earnings of 44 cents per share, beating the 41 cents analysts expected. Revenue reached $2.31 billion, above the $2.18 billion consensus estimate.
Sales increased 96% from a year earlier. In other words, Palantir generated almost twice as much revenue as it did in the same quarter last year. Its U.S. commercial business was especially strong. Revenue from those customers jumped 148% to $984 million, exceeding U.S. government revenue for the first time in the company’s history.
That matters because Palantir has long been associated with government work. Its latest results show that private businesses are becoming an increasingly important source of growth.
The appeal is straightforward. Companies have enormous amounts of information, but turning that information into useful decisions can be difficult. Palantir helps connect data with the work employees need to do.
For customers, the value comes from using AI to solve practical problems, improve decisions, and make operations more efficient.
Why Investors Focused on Contracts
The concern was less about what Palantir earned during the quarter and more about what its contracts might signal for future growth.
Total contract value, which measures the value of deals signed during the period, increased just 6% from a year earlier. That looked modest next to revenue growth of 96%.
UBS also highlighted that remaining performance obligations were roughly unchanged from the previous quarter. This measure tracks contracted revenue the company has yet to recognize.
Think of it as part of the work already lined up for future periods. Investors generally want that number to increase as a business expands.
According to UBS, Palantir attributed the flat result mainly to shorter contract lengths.
William Blair analyst Louie DiPalma believes Palantir’s growth could hold up better than growth at some other companies tied to the AI boom. His argument centers on recurring revenue and the company’s substantial government business. Customers that depend on software for important daily operations may continue paying for it over extended periods.
That provides a different source of demand from a one-time equipment purchase.
William Blair maintains an outperform rating and sees potential for PLTR stock to reach $200 over the next year.
Other firms have higher targets. Deutsche Bank has a Buy rating and a $240 target. Bank of America rates the shares Buy with a $255 target, while UBS and Citi each have Buy ratings and $250 targets. JPMorgan carries an Overweight rating and a $262 target.
Morgan Stanley is more cautious. It raised its target to $233 from $205 but maintained an Equal-weight rating.
Growth Is Also Producing Profits
Another reason analysts remain interested in PLTR stock is that Palantir’s expansion is producing substantial profits. The company reported an adjusted operating margin of 62%. Put simply, it generated about 62 cents in adjusted operating profit for every dollar of revenue. That measure excludes certain expenses and differs from its standard accounting margin.
Analysts also see opportunity in sovereign AI, which broadly involves organizations maintaining greater control over their AI systems and data.
For governments and businesses handling sensitive information, that control can be an important consideration when choosing software.
What Investors Should Watch Next With PLTR Stock
Palantir’s latest quarter leaves investors with a strong business and a demanding set of expectations. The next test is whether new agreements, customer spending, and renewals support continued rapid growth. Investors should also watch whether international commercial demand strengthens and contracted future revenue resumes climbing.
The selloff shows that excellent headline numbers alone may not satisfy the market. But if Palantir keeps turning AI demand into revenue and profits while addressing the contract concerns, analysts will have a stronger foundation for their bullish outlook on PLTR stock.
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