Palantir's Blowout Quarter Changes the Story. What Should Investors Do Now?

Core Insights - Palantir's shares fell despite reporting strong quarterly results due to its extreme valuation multiples, with a forward price-to-earnings multiple exceeding 200 and a price-to-sales ratio above 130 [1][5]. Financial Performance - Palantir reported third-quarter revenue of approximately $1.2 billion, reflecting a 63% year-over-year increase, with adjusted earnings per share rising to $0.21 from $0.14 in the previous year [3]. - U.S. revenue surged by 77%, while U.S. commercial revenue increased by 121%, driven by broader AI platform deployments and larger deal sizes [3][4]. - The company closed deals with a record total contract value of $2.76 billion and guided for fourth-quarter revenue of $1.33 billion, raising its full-year revenue outlook to about $4.4 billion from a previous estimate of $4.15 billion [3][4]. Market Position and Valuation - Palantir's valuation is significantly higher than that of established competitors like Microsoft, which has a price-to-sales ratio of less than 14, despite Palantir's faster growth [6]. - The company needs to maintain its commercial momentum and demonstrate operating discipline to justify its high valuation [7]. Future Outlook - Palantir's total contract value grew by 140% year-over-year during the quarter, indicating a strong setup for 2026 [9]. - Despite the impressive momentum, the stock's valuation remains a concern, as the fundamentals need to catch up with the high price [9][10].