Why Palantir Technologies Stock Crashed Today
Key Points
Palantir delivered its 13th consecutive quarter of accelerating revenue growth, but cracks may be appearing under the surface.
The company beat expectations and raised its guidance, but its backlog grew more slowly.
That, combined with its premium valution was enough to sink the stock.
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Palantir Technologies (NASDAQ: PLTR) tumbled out of the gate Tuesday, falling as much as 7.3%. As of 11:32 a.m. ET, the stock was down 3.5%.
The catalyst that sent the data mining and artificial intelligence (AI) software specialist lower was investor reaction to its better-than-expected quarterly financial report, which some viewed as a mixed bag.
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A classic beat and raise, but...
For the third quarter, Palantir delivered record revenue of $2.3 billion, an increase of 96% year over year and 20% quarter over quarter. This marked the 13th successive quarter of accelerating growth. This drove earnings per share (EPS) of $0.44, up 144%. Analysts' consensus estimates called for revenue of $2.2 billion and EPS of $0.41, so Palantir cleared both hurdles with ease.
The company's Artificial Intelligence Platform (AIP) was the catalyst that drove Palantir's impressive growth. While U.S. government revenue of $953 million climbed 96%, U.S. commercial revenue -- which includes AIP -- soared 148% to $984 million, overtaking government contracts as the company's largest growth driver for the first time.
There's more. Palantir's gross profit margin climbed to 83.4%, up from 82.4% in the prior-year quarter, while its net profit margin rose to 49%, up from 40.3%. This illustrates how efficient the company is at sending more of its revenue to the bottom line.
Management raised its full-year guidance for 2026, forecasting full-year revenue of roughly $8.53 billion, representing 91% growth and well ahead of Wall Street's consensus estimates of $8.22 billion.
That all sounds like good news, so why is the stock falling? Palantir's contracts and the resulting backlog appear to have decelerated. The company's total contract value (TCV) climbed 6% year over year, down from 49% growth in Q2. This fueled concerns that Palantir's hectic pace of growth may finally be moderating.
Moreover, Palantir is selling for 147 times earnings, a premium valuation to be sure. That, combined with fears that the company's future growth may be slowing, was enough to tank the stock today. It's important to remember that Palantir's sales can be lumpy, which can lead to variations from quarter to quarter. While this trend is certainly worth watching, I don't think the sky is falling.
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Danny Vena, CPA has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
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