IMPLICATOR
U.S. commercial revenue passed U.S. government revenue at Palantir for the first time in the third quarter, and the shares fell anyway. Total revenue rose 96% from a year earlier to $2.313 billion in the three months ended Sept. 30, the company said Monday.
Palantir has become a bellwether for market confidence that AI software can turn into revenue growth. Its numbers arrived days after Alphabet suffered its worst one-day drop on record.
What Changed
- U.S. commercial revenue grew 148% to $984 million and passed U.S. government revenue of $953 million for the first time.
- Total revenue rose 96% from a year earlier to $2.313 billion, above the $2.18 billion analysts expected.
- Palantir raised its annual revenue forecast to between $8.530 billion and $8.534 billion, from between $8.150 billion and $8.158 billion.
- U.S. commercial contract value rose 11% to $1.463 billion, and shares dropped 3.6% in after-hours trading.
AI-generated summary, reviewed by an editor. More on our AI guidelines.
The crossover
U.S. commercial revenue grew 148% to $984 million, while U.S. government revenue grew 96% to $953 million. A year earlier, commercial brought in $397 million. Government brought in $486 million.
Both lines beat forecasts. Analysts had predicted $942.7 million from commercial customers and $861.5 million from the government.
Palantir built its business around government and defense contracts, and it develops the Maven Smart System used by NATO's military headquarters. More recently it has aimed to use AI to spur growth in the U.S. commercial market, such as in healthcare and finance.
"I don't believe anyone's had consistent results like this in the history of software AI, ever," CEO Alex Karp told CNBC. He added that the business is succeeding without salespeople.
FREE AI BRIEFING · WEEKDAYS
Follow who is paying for AI software.
Get the AI stories shaping the day, with concise context from San Francisco. The briefing takes about five minutes and arrives at 4:45 a.m. Pacific, 7:45 a.m. Eastern.
Free. No hype. Unsubscribe anytime.
A raised forecast
Revenue beat the $2.18 billion analysts expected, and adjusted earnings of 44 cents a share beat the 41-cent estimate. Net income more than doubled to $1.13 billion from about $476 million. Chief Financial Officer David Glazer called the 96% the "highest-ever" year-over-year growth rate Palantir has reported.
Palantir raised its annual revenue forecast to between $8.530 billion and $8.534 billion, from between $8.150 billion and $8.158 billion. That is roughly 91% growth. For the fourth quarter it expects $2.649 billion to $2.653 billion, above the $2.46 billion analysts estimated.
Slower bookings
New contracts grew far more slowly. Total contract value, the potential lifetime value of deals signed, rose 6% from a year earlier to $2.918 billion. U.S. commercial contract value rose 11% to $1.463 billion. U.S. commercial remaining deal value reached $6.517 billion, up 79% from a year earlier and 4% from the previous quarter.
"Some investors may be disappointed with the U.S. commercial bookings," William Blair analyst Louie DiPalma said in a report. "The 11% bookings growth rate was significantly below the 153% growth that the company reported last quarter and was the lowest growth since 2023."
Those totals carry a limit. Palantir's contract value presumes that customers exercise every option and that no contract is terminated. The company says the majority of its contracts are subject to termination provisions, including for convenience.
Know someone who'd find this useful? ✉️ Email it to a friend in one click, or they can subscribe free here.
The stock
Shares rose about 1.5% immediately after the figures came out, then dropped 3.6% in after-hours trading. Tech stocks broadly have been under pressure since last week, amid concerns over the cost and financing of the AI investment boom. Alphabet lost $505 billion in market value since it published third-quarter figures last week. The Nasdaq Composite fell more than 1% Monday.
Palantir stock had retreated 2% this year heading into the report, after jumping 135% last year. It trades at a 12-month forward price-to-earnings ratio of 83.38, compared with 109.05 for Snowflake and 80.16 for Datadog.
"Like all AI names, Palantir came into earnings priced to perfection, hence the pullback off the beat. Elevated expectations seem to be the main factor holding back this recent high flyer," said Ryan Lee, senior vice president of product and strategy at Direxion.
On the analyst call, Karp said potential clients seek out Palantir because they are concerned about their intellectual property and getting value from it. He compared it in various ways to romantic relationships.
"We've gone from being the most attractive person in the physics department to being the captain of the football team kind of thing," he said. "I mean, not that I did that."
Frequently Asked Questions
What did Palantir report for the third quarter?
Total revenue rose 96% from a year earlier to $2.313 billion in the three months ended Sept. 30. Net income more than doubled to $1.13 billion from about $476 million.
What changed between commercial and government revenue?
U.S. commercial revenue grew 148% to $984 million, while U.S. government revenue grew 96% to $953 million. It was the first time U.S. commercial revenue passed U.S. government revenue.
Why did an analyst flag bookings?
U.S. commercial contract value rose 11% to $1.463 billion. William Blair analyst Louie DiPalma said that was significantly below the 153% growth the company reported last quarter and was the lowest growth since 2023.
What is Palantir's new forecast?
Palantir raised its annual revenue forecast to between $8.530 billion and $8.534 billion, from between $8.150 billion and $8.158 billion. For the fourth quarter it expects $2.649 billion to $2.653 billion, above the $2.46 billion analysts estimated.
How did the stock react?
Shares rose about 1.5% immediately after the figures came out, then dropped 3.6% in after-hours trading. Ryan Lee of Direxion said elevated expectations seem to be the main factor holding the stock back.
AI-generated summary, reviewed by an editor. More on our AI guidelines.
Free AI briefing · Weekdays
The AI stories that matter, sourced and explained.
Join the Morning Briefing. It goes out every weekday at 4:45 a.m. Pacific, with later sends for the East Coast, Berlin and Tokyo.
Free when you sign up: The Paperclip Compendium, our tested guide to running AI agents.
Free. Unsubscribe in one click.
Marcus Schuler
Editor-in-Chief and founder of Implicator.ai. Former ARD correspondent and senior broadcast journalist with 10+ years covering tech. Writes daily briefings on policy and market developments. Based in San Francisco. E-mail: editor@implicator.ai
