- Bookings, not revenue, rattled investors. Palantir closed $1.5 billion of total contract value in its US commercial segment in the third quarter, up 11% from a year earlier, after a record $2.1 billion in the second quarter that was up 153%. Shares fell more than 7% in premarket trading on Tuesday, and CNBC reported a 5% slump on the day.
- The headline numbers were strong. Adjusted earnings of 44 cents a share beat the 41 cents analysts polled by LSEG expected, and revenue of $2.31 billion topped the $2.18 billion consensus, nearly doubling from a year ago and crossing $2 billion for the first time. US commercial revenue more than doubled to $984 million and topped US government revenue for the first time.
- Analysts blamed shorter contracts. Goldman Sachs noted the company attributed the bookings slowdown partly to shorter contract durations, and UBS called the sequentially flat remaining performance obligations, or backlog, the first since 1Q23, “the only real flaw in the print.” Citi pointed to total contract value up 6% year over year as less strong, but said the bookings faced tough comparisons.
- Wall Street stays bullish. JPMorgan rates the stock Overweight with a $262 target, Bank of America Buy at $255, UBS and Citi Buy at $250, Deutsche Bank Buy at $240 and William Blair Outperform with a $200 target, while Morgan Stanley stays at Equal-weight but raised its target to $233 from $205.
What Happened?
Palantir reported third-quarter results on Monday, and the stock fell on Tuesday as analysts focused on what they called “forward indicators” such as total contract value. Piper Sandler said investors will “no doubt be looking for evidence in subsequent quarters that 11% growth in U.S. commercial TCV bookings is a fluke of duration and not something structural,” adding that it believes that is the case. JPMorgan highlighted revenue growth accelerating to 96% year over year with 62% operating margins, and Deutsche Bank said the mix of growth and profitability pushed Palantir’s Rule of 40 score to 158, its 13th consecutive increase.
Why It Matters?
Palantir trades on the expectation that growth will keep accelerating, so any soft spot in forward-looking metrics gets punished, especially during a broad selloff in AI-linked stocks. William Blair’s Louie DiPalma said valuations for many AI supply chain providers have been cut in half on concerns about sustainability, but argued Palantir’s growth should be “more resilient than others” because its revenue is recurring, with half coming from defense agencies. Morgan Stanley’s Sanjit Singh sees the sovereign AI and open-weight model movement as a new phase of growth, with Palantir a primary beneficiary.
What’s Next?
The next test is whether shorter contracts convert into longer commitments, which Goldman said Palantir “has done successfully in the past.” UBS said the fourth-quarter guidance implies 100% revenue growth, another acceleration, and Citi noted the high end of the guide assumes 89% growth, so the bar for the next report is already high. Investors will watch whether US commercial bookings and backlog reaccelerate alongside revenue.
Affected Tickers and Coins: PLTR
