Palantir shares slip by 7% despite posting record revenue in third quarter

Investing.com - Shares of Palantir fell by more than 7% in early trading on Tuesday, despite the data analytics titan posting another quarter of record revenue.

Palantir, whose operations also involve software for the defense sector, reported net profit of $475.6 million on $1.18 billion in third-quarter sales, both topping estimates.

Writing in a letter with the release, Chief Executive Alex Karp said the business is "now producing more profit in a single quarter than it did in revenue not long ago."

The Denver-based company also forecast better-than-anticipated current-quarter sales, fueled by a boom in AI adoption which has lifted demand for its data analysis services. The firm has also garnered increased government contracts, including $500 million worth of agreements with the Internal Revenue Service and State Department, as media reports suggest that it has developed close ties with the Trump administration.

Palantir’s stock price has soared by more than 175% so far this year, becoming a reflection of sky-high valuations being driven by the AI craze. Underscoring its influence on sentiment around frothiness in portions of the stock market, Frankfurt-listed shares of several mega-cap tech players who have outlined plans for heavy AI spending dropped.

Eyeing a market capitalization of $491.3 billion, some analysts have expressed skepticism around Palantir’s expensive value.

In a note to clients, analysts at Jefferies said Palantir’s numbers are "great" but its "valuation is extreme."

"We are fundamental fans and the numbers speak for themselves, but we believe the risk/reward at 83x [estimated calendar year 2026 revenues] is unfavorable and prefer to own AI in other ways," the analysts wrote.

Others, however, have backed the trajectory of the company. Analysts at Morgan Stanley including Sanjit Singh and Keith Weiss said Palantir’s momentum has not "shown any signs of abating," pointing to the group’s guidance for the fastest-ever sequential revenue growth despite an ongoing federal government shutdown.

"It is hard to find a better fundamental story in software than Palantir," the Morgan Stanley analysts wrote. "When assessing Q3 results, it is actually difficult to choose which key performance indicator is most impressive."

Karp, for his part, said during a call with investors that such worries were coming from "high-trained" elites.

"What I see in these numbers, and what I think we see in these numbers is, to put it slightly over the top, yeah, we were right, you were wrong, and we are going to go very, very deep on our rightness because it is exceedingly good for America," Karp added.