Palantir CEO Calls Earnings ‘Best Results That Any Software Company Has Ever Delivered.’

Palantir Technologies reported strong third-quarter earnings results on Monday afternoon. Its shares sank 7.5% in the Tuesday premarket after rising 0.7% in after-hours trading on Monday, having hit an all-time high during normal trading hours.

Adjusted earnings-per-share were 21 cents, above Wall Street’s consensus estimate of 17 cents, and up from ten cents last year. Revenue for the quarter reached $1.18 billion, ahead of expectations for $1.09 billion, and up 63% on the year.

Palantir began as a defense and intelligence contractor, but it now has customers in other parts of government and a thriving private-sector business. It offers a platform that integrates an organization’s data, from disparate sources various formats, into simple dashboards that use artificial intelligence to aid in decision-making.

Palantir’s U.S. business continues to see blockbuster growth, up 77% from 2024, boosted by a 121% rise in U.S. commercial sales. U.S. commercial customers represented 34% of third-quarter company revenue, up from 25% a year ago.

Other software companies have achieved those sales growth rates, but they are typically unprofitable by generally accepted accounting principles. Palantir had a 40% GAAP profit margin in the third quarter, up from 20% last year.

Palantir projected fourth-quarter revenue of $1.33 billion, ahead of the $1.18 billion Wall Street consensus, with an adjusted operating margin of 52% versus expectations for 42%. The company said that U.S. commercial sales growth would continue to be in the triple-digits.

“These aren’t extraordinary results,” said CEO Alex Karp in the earnings call. “These are arguably the best results that any software company has ever delivered. And that’s not hyperbolic.”

Given these high growth rates, Palantir has a stretched valuation, trading at trades at 248 times the adjusted earnings-per-share expected for the next 12 months, and 88 times forward sales. The stock is up 174% this year, versus a 16% rise for the S&P 500 index.

Along with the exceptional financials, there is some hype in the mix. Palantir has a devoted online community of retail investors who have repeatedly shown that they will buy any dip in the share price.

Strong financials and a stratospheric valuation has led to lots of disagreement among Wall Streert analysts. The average rating on the stock is Hold, while targets for the stock price range from $45 to $210. According to FactSet, the consensus call is for $158.76. That implies a 23% drop in the share price, which closed Monday at $207.18.

Karp addressed the Wall Street bears in his letter to shareholders. “This ascent has confounded most financial analysts and the chattering class, whose frames of reference did not quite anticipate a company of this size and scale growing at such a ferocious and unrelenting rate,” he said.

“Some of our detractors have been left in a kind of deranged and self-destructive befuddlement.”

Write to Adam Levine at adam.levine@barrons.com