Third-quarter revenue came in at $2.3bn ($2.2bn expected), up 96% year-over-year and 20% quarter-over-quarter. Growth was again led by the US, with commercial up 148% and government up 96%.
Adjusted operating profit rose 138% to $1.4bn ($1.3bn expected). Adjusted free cash flow was $1.2bn. Palantir ended the period with net cash, including leases, of $10.3bn.
For the coming quarter, Palantir expects revenue of around $2.65bn, with adjusted operating profit of around $1.64bn. For the full year, revenue is now expected to land around $8.53bn (previously around $8.15bn), with adjusted operating profit of around $5.25bn.
The shares were down 7.4% in after-hours trading.
Our view
Palantir delivered another blockbuster quarter. Revenue growth accelerated for the 13th quarter in a row, margins held above 60%, and full-year guidance was raised again. But the bar was sky-high, and a couple of more technical points (more below) took some of the shine off.
The big theme was sovereign AI, which lets organisations train AI models on their own data while retaining control. Demand is clearly building, projects are moving from trial to full rollout faster, and there’s evidence that spending can scale quickly once the value is proven.
That speaks to what makes Palantir special. Its software sits at the heart of how customers use their data, linking it to decisions and day-to-day processes so AI tools can work with the right context. Once customers are ensnared in the Palantir world and seeing the benefits, it's very hard to move away.
Customer concentration is both a risk and an avenue for growth. The top 20 customers are spending an average of $146mn a year, vs $2.2mn for the average customer. We take the view that this is an opportunity to capture significant growth from a broader cohort of businesses who are already in the ecosystem.
Revenue, profit and cash flow are all booming. US commercial revenue overtook US government revenue for the first time, showing how far business demand has come. International growth is improving but remains well behind the US.
Palantir is investing for growth, and therein lies one of the niggles. Margins held up well, flat quarter-on-quarter, but the double boost of fast-growing revenue and expanding margins looks to be tempering.
New orders also slowed, with the value of contracts signed down sharply from last quarter's record. Management put this down to customers signing shorter first deals to get started with sovereign AI. We tend to agree these should lead to longer, larger contracts over time, which fits with how sticky the platform has proven to be.
Despite strong recent performance, the valuation has come down over the past year as rising earnings expectations haven’t been fully priced in by investors. We don't think the multiple needs to expand from here to support the investment case. Earnings growth of around 46% is expected for 2027, which looks conservative. We take a positive stance based on the scale of earnings growth Palantir can deliver, rather than a higher valuation.
There are two key risks. At around 81 times expected earnings, the valuation is high by absolute standards, which adds an extra degree of volatility. The second is costs, given our earnings growth thesis relies on costs staying under control.
Environmental, social and governance (ESG) risk
The technology sector is generally medium/low risk in terms of ESG, though some segments are more exposed, like Electronic Components (environmental risks) and data monetisers (social risks). Business ethics tend to be a material risk within the tech sector, ranging from anti-competitive practices to intellectual property rights. Other key risks include labour relations, data privacy, product governance and resource use.
According to Sustainalytics, the company's overall management of material ESG issues is average.
The company’s executive pay isn’t tied to ESG targets, and its board committee only oversees governance. It also lacks an environmental policy and recent ESG reports, but it does have a whistleblower program in place. Palantir’s three co-founders have control over the company through a complex share structure, this reduces the impact that ordinary shareholders can have and is a risk to note.
Palantir key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.