Palantir Shares Fall 7% Despite Record Revenue and Strong AI Growth
Palantir Technologies shares fell more than 7% in early Tuesday trading, even after the data analytics and defense software firm reported another record-breaking quarter with results exceeding Wall Street expectations.
The company posted a net profit of $475.6 million on $1.18 billion in third-quarter revenue, both above analyst estimates. In a letter to shareholders, CEO Alex Karp highlighted the company’s progress, noting that Palantir is “now producing more profit in a single quarter than it did in total revenue not long ago.”
Based in Denver, Palantir forecasted stronger-than-expected Q4 sales, driven by a surge in AI adoption and rising demand for its data analytics platforms. The company also secured several new U.S. government contracts, including $500 million in agreements with the Internal Revenue Service and the State Department. Recent media reports suggest Palantir has developed close ties with the Trump administration.
Analysts Divided Over Palantir’s Valuation
Despite its strong performance, some investors remain cautious. Palantir’s stock has soared 175% year-to-date, becoming a symbol of AI-driven market enthusiasm and the lofty valuations that come with it. The company now boasts a market capitalization of $491.3 billion, raising concerns among some analysts about whether its value can be justified.
Analysts at Jefferies praised Palantir’s results as “great” but warned that its valuation is extreme, trading at roughly 83 times estimated 2026 revenues. They noted that while they like the company’s fundamentals, they “prefer to own AI in other ways” given the risk-to-reward ratio.
However, not all analysts share that view. Experts at Morgan Stanley, including Sanjit Singh and Keith Weiss, argued that Palantir’s growth momentum remains strong, pointing to record sequential revenue increases despite challenges such as the ongoing federal government shutdown.
“It is hard to find a better fundamental story in software than Palantir,” the Morgan Stanley team wrote. “When reviewing Q3 results, it’s actually difficult to pick which performance metric stands out most.”
CEO Karp Responds to Critics
During a call with investors, Alex Karp responded to critics who questioned Palantir’s valuation, suggesting that many of them were “high-trained elites” out of touch with market reality.
“What I see in these numbers is simple,” Karp said. “We were right, you were wrong, and we are going to go very, very deep on our rightness because it’s exceedingly good for America.”
Despite the short-term stock decline, analysts believe Palantir remains one of the most influential AI-driven companies shaping the next generation of software and defense technologies.
