Palantir Q3 2025 Results Spark Valuation Debate

Palantir Technologies (PLTR) reported Q3 2025 results on Nov. 19, showing accelerating AI-driven commercial growth and raising full-year guidance. Despite strong operational momentum, billionaire hedge funds trimmed positions, and concerns over the stock’s high multiples tempered investor enthusiasm.

Q3 Results Highlight AI-Driven Growth and Profitability

Palantir posted third-quarter revenue of $1.2 billion, a 63.0% increase year over year. U.S. commercial revenue surged 121.0% to $397 million, driven by adoption of Palantir AI platforms—Gotham, Foundry, Apollo, and AIP—across defense, healthcare, manufacturing, and financial services. Government business grew 52.0% to $486 million. Net dollar retention reached an all-time high of 134.0%, signaling deeper spending from existing customers.

The company achieved significant profitability gains, with an operating margin of 33.0% and net margins above 40.0%. Stock-based compensation declined to 15.0% of revenue, while cash reserves remained above $6 billion. Sales execution included 53 contracts worth at least $10 million and 204 deals signed during the quarter, metrics that analysts cite as evidence of scaling economics.

Palantir disclosed a co-development partnership with Nvidia to integrate its software with Nvidia’s AI hardware stack. CEO Alex Karp described the effort as one that "will become, on its own, one of the most significant business stories of the century in American economic life," reflecting management’s view of the long-term commercial opportunity.

Valuation Concerns Temper Enthusiasm Amid Hedge Fund Selling

Palantir’s valuation remains a key concern for investors. The shares trade at roughly 117 times sales, with forward earnings multiples near 450 times on consensus estimates and about 295 times for the next year. The company’s market capitalization was approximately $423 billion as of Nov. 19.

Analysts highlighted the accelerating U.S. commercial growth and rising operational leverage, while Nvidia’s stronger-than-expected Q3 results the same day supported sentiment for AI-focused suppliers. However, billionaire hedge funds managed by Israel Englander and David Shaw reduced their Palantir holdings in the third quarter, moves linked to valuation concerns rather than the company’s fundamentals.

Street forecasts reflect a split between enthusiasm for Palantir’s business and caution over its multiples. Analysts project more than 100% revenue growth in the U.S. commercial segment for 2026 and operating cash flow exceeding $2 billion. Consensus adjusted EPS estimates for 2026 range between $0.80 and $0.95, while bullish scenarios extrapolating current growth suggest EPS between $5.50 and $6.50. These projections assume continued rapid adoption of AIP, expansion in both commercial and government sectors, and sustained margin improvements.

The company raised full-year revenue and free cash flow targets in its Q3 materials, though specific guidance figures were not disclosed. No material regulatory actions, approvals, or mergers and acquisitions were announced during the period, leaving investors to weigh whether Palantir’s AI-driven sales acceleration, sticky customer metrics, and cash generation justify its rich valuation and occasional hedge fund selling.