Palantir Earnings: AI Flame Continues to Burn Bright, but Shares Are Overheated

Key Morningstar Metrics for Palantir Technologies

• Fair Value Estimate: $21.00
• Morningstar Rating: 1 star
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

What We Thought of Palantir Technologies’ Earnings

Palantir Technologies PLTR reported robust third-quarter results, with the firm’s top line growing 30% year over year to $726 million and operating margins expanding to 15.6% from 7.2% a year ago. US commercial customers drove the top line, with sales from the segment growing 54% year over year.

Why it matters: Palantir remains one of the clearest beneficiaries of an uptick in demand for artificial intelligence solutions. The firm’s AI platform, AIP, continued to fire on all cylinders in the quarter, with demand from both commercial and government clients.

• Palantir’s commercial revenue grew 27% year over year to $317 million, with US commercial sales now constituting 56% of the total commercial sales. US commercial customer accounts rose to 321 from 181 a year ago, highlighting Palantir’s ability to land new business via AIP.
• Palantir’s government sales were impressive as well. Government revenue expanded 33% year over year to $408 million. We see a long runway of growth in the government sector, owing to the massive demand for AI-first solutions across governmental functions such as the military and healthcare.

The bottom line: With another better-than-expected quarter in the books, we are raising our fair value estimate to $21 per share from $19. While we view the stock as materially overvalued, we remain optimistic about the firm’s growth and margin expansion opportunity in the coming years.

• Palantir is by far the most expensive software company under our coverage, with an enterprise value 31 times our 2025 sales estimate. We view the long-term growth implied in its current valuation as unrealistic.
• With the firm’s shares priced for perfection, we’d remind investors that any bump in the road—such as sales execution challenges or weaker-than-expected top-line growth or guidance—could materially affect the valuation.