Palantir Stock Edges Down Despite Stellar AI-Driven Q3 Earnings Results and Raised 2025 Guidance
Key Points
Third-quarter revenue jumped 63% year over year, sprinting by Wall Street's expectation of 50% growth.
Adjusted earnings per share (EPS) surged 110%, surpassing the 70% consensus analyst estimate.
Management significantly increased its 2025 guidance for several metrics, including revenue growth, which it raised to 53% from 45%.
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Palantir Technologies (NASDAQ: PLTR) stock is down 2.9% as of 6:52 p.m. ET in after-hours trading on Monday, following the artificial intelligence (AI)-powered data analytics company's release of its third-quarter 2025 earnings report.
The report was stellar. The quarter's revenue and earnings beat Wall Street's expectations, fourth-quarter revenue guidance exceeded the consensus estimate, and management raised its full-year 2025 guidance for several key metrics.
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So why did the stock edge down? The main reason likely has to do with expectations. Palantir stock trades at a sky-high valuation, so extremely high expectations were probably already largely built into the stock price. Another possible reason is that some investors might be concerned about the potential effects on Palantir's business of the prolonged U.S. government shutdown.
Image source: Getty Images.
Palantir Technologies' key numbers
| Metric | Q3 2024 | Q3 2025 | Change* |
|---|---|---|---|
| Revenue | $726 million | $1.181 billion | 63% |
| GAAP operating income | $113 million | $393 million | 248% |
| Adjusted operating income | $276 million | $601 million | 118% |
| GAAP net income | $144 million | $476 million | 231% |
| Adjusted net income | $242 million | $529 million | 119% |
| GAAP earnings per share (EPS) | $0.06 | $0.18 | 217% |
| Adjusted EPS | $0.10 | $0.21 | 110% |
Data source: Palantir Technologies. GAAP = generally accepted accounting principles. *Calculations by author except for revenue growth, which was provided by Palantir.
Investors should focus on the adjusted numbers, which exclude one-time items.
Wall Street was looking for adjusted EPS of $0.17 on revenue of $1.09 billion, so Palantir exceeded both estimates. It also surpassed its own guidance, which was for revenue of $1.083 billion to $1.087 billion. The company doesn't issue earnings guidance.
In the quarter, the company generated cash of $508 million running its business (this is operating cash flow), up 20% year over year. Adjusted free cash flow (FCF) was $540 million, up 24%. It ended the quarter with cash, cash equivalents, and short-term investments of $6.4 billion. It has no long-term debt.
What happened with Palantir in the quarter?
All percentage growth figures are year over year.
- Commercial revenue grew 73% to $548 million, accounting for 46% of total revenue.
- Government revenue increased 55% to $633 million, or 54% of total revenue.
- By region, U.S. revenue rose 77% to $883 million, accounting for about 75% of total revenue. (Non-U.S. revenue accounted for the other 25% of revenue.)
- Total customer count increased 45%.
- The company closed 204 deals over $1 million, 91 deals of at least $5 million, and 53 deals of at least $10 million.
- U.S. commercial revenue jumped 121% to $397 million.
- U.S. commercial customer count surged 65% to 530.
- U.S. commercial total contract value (TCV) deals closed soared 342% to $1.31 billion.
- U.S. commercial remaining deal value rocketed 199% to $3.63 billion.
- U.S. government revenue grew 52% to $486 million. This market began with defense and intelligence agencies but now also includes other agencies.
Guidance issued for Q4 and raised for full-year 2025
Q4 guidance:
- Revenue of $1.327 billion to $1.331 billion. This equates to growth of 60% to 61% year over year.
- Adjusted income from operations of $695 million to $699 million. This equates to growth of 87% to 88% year over year.
Going into the release, Wall Street had been expecting Q4 revenue of $1.18 billion, so Palantir's outlook sailed by this expectation.
Annual guidance:
| Metric | Prior 2025 Guidance | Current 2025 Guidance |
Wall Street Estimate |
Change Implied by Guidance* YOY |
|---|---|---|---|---|
| Total revenue | $4.142 billion to $4.150 billion | $4.396 billion to $4.400 billion |
$4.16 billion |
53% (up from 45%) |
| U.S. commercial revenue | Greater than $1.302 billion | Greater than $1.433 billion | N/A | At least 104% (up from at least 85%) |
| Adjusted operating income | $1.912 billion to $1.920 billion | $2.151 billion to $2.155 billion | N/A |
90% to 91% (up from 69% to 70%) |
| Adjusted free cash flow | $1.8 billion to $2.0 billion | $1.9 billion to $2.1 billion | N/A |
52% to 68% (up from 44% to 60%) |
| GAAP operating income and GAAP net income | Same as prior guidance -- positive in each quarter | Same as prior guidance | N/A | -- |
Data source: Palantir Technologies. YOY = year over year. *Calculations by author except for total revenue and U.S. commercial revenue growth guidance, which Palantir provided.
Another fantastic quarter
In short, Palantir turned in another fantastic report. As I've written in some form for over a year, I believe Palantir stock will be a winning long-term investment. But as I wrote last quarter, "given the stock's sky-high valuation, only those who truly have long investing horizons should consider buying it."
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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
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