Palantir Stock Drops Despite Blowout Q3 Earnings and 96% Revenue Growth

Key takeaways

• Q3 revenue surged 96% to $2.31 billion, driven by strong demand for Palantir's AI software
• Slowing commercial contract growth and valuation concerns weighed on investor sentiment
• The company increased its full-year revenue forecast to approximately $8.53 billion

Palantir Technologies delivered stronger-than-expected third-quarter earnings on Monday, but its stock declined in after-hours trading as investors weighed slowing commercial contract growth against the company's soaring artificial intelligence revenue.

The software company reported quarterly revenue of $2.31 billion, which is a 96% increase from the previous year and exceeding Wall Street's expectations of approximately $2.18 billion. Adjusted earnings per share reached $0.44, beating analysts' forecasts of $0.41.

Despite these results, Palantir shares fell approximately 3.8% to $171.52 in after-hours trading, after a 3.13% decline during Monday's regular session.

<iframe src=”https://widgets.coincodex.com/w/dd83840e-118b-4704-9d28-5e6541c09dc8?site=coinpaper&mode=light” width=”100%” height=”420” frameborder=”0” referrerpolicy=”no-referrer-when-downgrade” style=”border:0;background:transparent;border-radius:0px;”></iframe>Palantir's AI Business Drives Record Revenue

Palantir's US commercial business was a major contributor to its earnings, and generated $984 million in revenue, up 148% year over year. For the first time, the company's US commercial revenue exceeded its US government revenue, which increased 96% to $953 million.

(Source: palantir.com)

Profitability also improved considerably. Palantir reported $1.13 billion in GAAP net income and approximately $1.22 billion in adjusted free cash flow, alongside an adjusted operating margin of 62%.

Why Is Palantir Stock Falling After Earnings?

Despite impressive financial growth, investors seemed concerned about slowing momentum in new commercial contracts. Palantir's US commercial total contract value increased just 11% year over year, compared with growth exceeding 153% in the previous quarter.

(Source: palantir.com)

This slowdown raised questions about whether the company could maintain its extraordinary growth trajectory, particularly given the premium valuation attached to its stock.

Investors also appeared to be taking profits after the company's substantial share-price gains. This could suggest that even stronger-than-expected earnings were not enough to satisfy elevated market expectations.

Palantir Raises 2026 Revenue Guidance

Palantir increased its full-year revenue forecast to between $8.530 billion and $8.534 billion, implying approximately 91% annual growth. The company also projected fourth-quarter revenue of $2.649 billion to $2.653 billion, comfortably exceeding analysts' expectations of approximately $2.46 billion.

Meanwhile, management raised its full-year US commercial revenue forecast to more than $3.559 billion, which represents growth of at least 143%.

Although Palantir's latest earnings shed some light on the exceptional demand for its software, investors will likely focus on new contract growth, valuation concerns, and the sustainability of its AI-driven expansion in the next few quarters.