TLDR
- Palantir stock dropped over 12% in five days following Q3 earnings despite beating estimates with $0.21 EPS versus $0.17 expected and $1.18 billion revenue versus $1.09 billion forecast.
- Michael Burry’s Scion Asset Management disclosed put options on 5 million Palantir shares, contributing to the sell-off after earnings.
- U.S. revenue jumped 77% to $883 million with U.S. commercial sales growing 121% and government revenue up 52%.
- The stock trades at a forward price-to-sales ratio of 110, with analysts maintaining mostly Hold ratings and an average price target of $187.87.
- Total contract value closed in Q3 surged 151% year-over-year to $2.76 billion, while the company raised full-year revenue guidance to $4.396-$4.4 billion.
Palantir Technologies reported one of its best quarters on record this week. The market didn’t seem to care.
The AI and data analytics company saw its stock fall over 12% in the five trading days following its November 3 earnings release. Shares dropped about 15% from pre-earnings levels through Wednesday’s close.
Palantir Technologies Inc., PLTR
The numbers themselves looked strong. Palantir posted earnings per share of $0.21, beating the consensus estimate of $0.17.
Revenue hit $1.18 billion, topping analyst expectations of $1.09 billion. That represented 63% growth from the prior year.
The stock initially rose when results dropped Monday evening. Then it reversed course during the earnings call, sliding 3.6% in after-hours trading.
By Wednesday, the damage was clear. This wasn’t supposed to happen after a blowout quarter.
U.S. revenue drove the growth story. Total U.S. sales jumped 77% to $883 million.
The commercial side exploded with 121% growth. Government contracts grew 52%.
Contract Pipeline Surges
The company’s future pipeline tells an even bigger story. Total contract value closed in the quarter surged 151% year-over-year to $2.76 billion.
That’s a massive jump in committed future revenue. It suggests demand isn’t slowing down.
GAAP earnings per share tripled from $0.06 to $0.18. Management raised full-year revenue guidance to between $4.396 billion and $4.4 billion.
Fourth-quarter revenue is expected to reach $1.327 billion to $1.331 billion. That implies 60.5% growth.
Adjusted operating income guidance came in at $695 million to $699 million. The operating margin should hit 52.4% at the midpoint.
The Burry Factor
One clear catalyst for the sell-off emerged in regulatory filings. Michael Burry’s Scion Asset Management disclosed put options on 5 million Palantir shares.
Burry famously predicted the 2008 housing crisis. His bearish bet on Palantir sent shockwaves through the market.
The timing couldn’t have been worse for bulls. The filing dropped right around earnings, amplifying the sell-off.
Burry’s track record gives his moves serious weight. When he goes short, people pay attention.
The valuation question keeps coming up. Palantir now trades at a forward price-to-sales ratio of 110.
That’s an extreme multiple even for a high-growth AI company. It prices in years of perfect execution.
The stock remains roughly 15.5% below its all-time high of $207.18. But it’s still up over 130% year-to-date.
Analyst reactions were mixed after the report. Several raised price targets while maintaining Hold ratings.
HSBC analyst Stephen Bersey lifted his target from $181 to $197. He kept a Hold rating.
Bersey projects the U.S. commercial segment could reach $9.3 billion in revenue by 2029. That would represent 59.3% annual growth from 2025 through 2029.
DA Davidson analyst Gil Luria raised his target from $170 to $215. He called Palantir “the best story in all of software.”
The consensus rating sits at Hold. Three analysts rate it Buy, 11 say Hold, and two recommend Sell.
The average price target of $187.87 implies about 7% downside from current levels. That suggests Wall Street sees limited upside at these prices.
CEO Alex Karp delivered his usual confident commentary on the earnings call. Nothing he said appeared to spook investors during the live event.
U.S. government contracts remain the biggest revenue source at $486 million in Q3. But the commercial business is closing the gap fast at $397 million.
The company continues winning major contracts across both sectors. Demand for AI solutions shows no signs of slowing.
The market opportunity in the private sector dwarfs government work. But corporate spending can evaporate quickly in a downturn.
Palantir closed total contract value of $2.76 billion in the third quarter, up 151% from the previous year.
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