Palantir, the data analysis firm, released an impressive earnings report for the third quarter on Monday, claiming that their results “crushed consensus expectations.”
Despite this, retail investors were not overly enthusiastic on Tuesday, as the company’s stock saw a slight decline. This reaction stems from indications that Palantir’s enterprise sales, a crucial growth sector, may be decelerating.
On the positive side, revenue surged by 96% compared to the same period last year, and increased by 20% from the prior quarter, reaching $2.31 billion. This figure surpassed analysts’ anticipations of $2.18 billion and marks the first instance of Palantir exceeding $2 billion within a single quarter. The company also reported adjusted earnings per share of 44 cents, topping the expected 41 cents. Additionally, Palantir raised its revenue forecast for the year, which typically results in a stock surge.
A notable milestone for Palantir occurred as its U.S. commercial revenue surpassed revenue from U.S. government contracts for the first time, reporting $984 million in commercial deals—an increase of 148% from the previous year—compared to $953 million from government contracts.
Enterprises are drawn to Palantir’s AI software, which enables them to implement frontier models and custom-train open-weight models securely while keeping their data confidential. Furthermore, the company has established a “forward-deployed” software engineering strategy, deploying its engineers directly with clients for tailored software solutions.
However, the company also indicated a concerning trend: despite rapid adoption of AI tools, many enterprises are opting for short-term trial contracts.
“What we’re observing in the commercial sector is a much quicker interaction and deployment process, albeit with shorter contract durations, leading to significant potential for contract expansion,” CEO Alex Karp explained during the quarterly earnings call with analysts.
Palantir is experiencing a peculiar situation in the enterprise AI landscape. Corporations are eager to experiment with AI software, often bypassing typical bureaucratic processes, but they also appear more inclined to cancel contracts.
Karp expressed a relaxed attitude regarding customer retention using colorful metaphors. “We’ve transitioned from being the most appealing figure in the physics department to the star of the football team,” he said, illustrating the influx of potential corporate clients. “Once you adopt Palantir, it’s a one-way street, which is evident in our results.”
Nonetheless, the figures do not yet confirm Palantir’s long-term viability. Although the company secured a substantial total contract value of $1.46 billion from U.S. enterprises in the quarter, this is a decline from the record $2.13 billion achieved in the previous quarter, indicating potential slowing sales.
Future earnings reports will reveal if Palantir has established itself as a key player in the U.S. enterprise AI market. Traditionally, many enterprises finalize their largest tech acquisitions in the last quarter of the year. Karp and his team sound optimistic, having raised their forecast for U.S. commercial revenue to exceed $3.559 billion, projecting a growth rate of at least 143%.
