Palantir boosts revenue forecast after Q3 beat, but stock falls: here’s why
Palantir Technologies Inc. raised its annual revenue forecast after reporting a stronger-than-expected third quarter, but shares of the data analytics firm fell in extended trading as investors questioned whether the company’s rich valuation can be justified.
The company said late Monday that revenue climbed 63% from a year earlier to $1.18 billion in the three months ended September, topping Wall Street’s average estimate of $1.09 billion.
Palantir now expects to generate $4.4 billion in revenue for the full fiscal year, up from its prior guidance of about $4.15 billion.
For the current quarter, the Denver-based firm projected sales of around $1.33 billion, ahead of analysts’ estimates of $1.19 billion, but implying a slight slowdown in growth from the previous period’s pace.
PLTR stock’s high valuation weighs on sentiment despite strong growth
Despite another solid performance, Palantir’s shares slipped 4.3% in after-hours trading, reversing an initial 7% gain after the results were released.
Analysts said the reaction reflected growing unease about how far the stock has run.
“The forecast implies a slight deceleration in revenue growth to roughly 61%, from the third quarter’s 63% jump – a cause of concern given the stock’s lofty valuation,” said Blake Anderson, associate portfolio manager at Carson Group.
The company’s shares have surged more than 175% this year, giving it one of the highest valuations in the S&P 500 Index.
As of Friday, Palantir traded at about 85 times sales and roughly 253 times forward earnings, according to FactSet data.
“As we have seen thus far this earnings season, earnings beats aren’t necessarily being rewarded owing to extended positioning and lofty expectations already baked into price,” Jake Behan, head of capital markets at Direxion, said in a note.
“At this valuation, even great numbers don’t move the needle. The bar is sky high and not an easy one to clear, even for Palantir.”
Analysts divided over sustainability of growth
Some market watchers argue the stock’s rally has become detached from fundamentals.
“This is a company with a $4 billion run rate that’s growing 63%,” said DA Davidson analyst Gil Luria on Bloomberg Television.
There’s nothing even remotely close to that, which is how we got to the situation where the valuation is at unprecedented levels.
Mandeep Singh of Bloomberg Intelligence noted that investors were also looking for more clarity on 2026 expectations.
“Palantir gave a forecast for the current quarter, but I think everyone wanted some sense of next year,” he said.
Only about a quarter of analysts covering the company rate the stock a buy, according to FactSet.
In a note to clients, RBC Capital Markets wrote last week that it “cannot rationalize why Palantir is the most expensive name in our software coverage.”
Management pushes back against critics
Palantir chief executive Alex Karp struck a defiant tone on a call with investors, dismissing sceptics as “out-of-touch elites.”
“We were right, you were wrong and we are going to go very, very deep on our rightness,” Karp said.
The company has now surpassed analyst sales estimates for 21 straight quarters.
Growth in its US commercial division continued to outpace its government business, though Karp acknowledged that Europe remains a drag.
“Growth is being held down by a stagnant Europe, which is still a significant part of our business,” he said.
Despite short-term market jitters, Palantir’s strong domestic momentum and record run of earnings beats suggest that few other software companies are growing at its current clip — even if the stock’s valuation leaves little room for error.
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