Palantir Just Did This for the First Time Ever. Is the Stock a Buy?

Palantir Technologies (PLTR -1.65%) has been one of the early winners of the artificial intelligence (AI) boom. The company sells AI-driven software that helps customers aggregate and make better use of their data. Customers have flocked to Palantir’s software as it offers them an opportunity to easily apply AI to their needs — without having to develop a platform on their own.

This has translated into tremendous growth for Palantir over the past couple of years, and this continued in the company’s latest blowout earnings report. Third-quarter revenue soared in the double digits, and Palantir lifted several full-year forecasts.

On top of this, Palantir did one thing in particular for the first time ever — and this is something that could determine what comes next. Is the stock a buy?

Image source: Getty Images.

Introducing customers to AIP

So, first, let’s talk a bit about Palantir’s business. The company has been around for more than 20 years, offering platforms that help customers leverage the power of their data. A few years ago, Palantir launched its Artificial Intelligence Platform (AIP), integrating large language models into its system. The company holds bootcamps to introduce customers to AIP, and through these sessions, they can go from zero to a use case in a matter of hours.

This has proven to be successful, as earnings have taken off at Palantir, and investors have piled into the stock to benefit.

PLTR Revenue (Quarterly) data by YCharts

The recent quarter represented another wave of growth for Palantir, with the company delivering a 96% increase in revenue to $2.3 billion and a Rule of 40 score of 158%. This metric measures a software company’s ability to balance growth with profitability, and a level of 40% is seen as good. So, at 158%, which represents the 13th straight quarterly gain, Palantir truly is winning.

The company, confident about the full year, raised its revenue forecast as well as forecasts for U.S. commercial revenue, adjusted income from operations, and adjusted free cash flow.

PLTR – Palantir Technologies

$175.40-$2.94 (-1.65%)

NASDAQ · As of 4:00 PM ET 11/03/26

Now, let’s consider the one thing in particular that Palantir did for the first time ever: Palantir’s U.S. commercial revenue surpassed its U.S. government revenue. They came in at $984 million and $953 million, respectively. And while the former advanced in the triple digits, the latter rose in the double digits.

Broadening the revenue stream

Though government revenue remains a core part of the Palantir story, this shows a clear shift into the commercial market. It’s significant because for most of the company’s history, it’s relied on government contracts for growth. Today, it has greatly broadened its revenue stream, and this increasing number of clients means less risk. Palantir had fewer than 20 U.S. commercial customers a few years ago, and now, that number has grown to more than 600.

I see this as a significant driver of growth moving forward as companies look for ways to apply AI quickly and easily — without having to start from scratch on their own.

Considering all of this, is Palantir a buy right now? It’s important to consider your investing strategy and comfort with risk before deciding. Cautious investors may not like certain elements, such as Palantir’s valuation. Though it’s come down considerably from earlier levels, the stock is still expensive at more than 100x forward earnings estimates.

PLTR PE Ratio (Forward) data by YCharts

Some investors might also worry about slowing growth in new U.S. commercial contract value; the company closed $1.4 billion in the third quarter, representing 11% growth, while in the second quarter, this metric advanced 153% to $2.1 billion. That said, contract signings may not always translate into linear growth; growth could ebb and flow while still supporting solid earnings gains over time.

Palantir may not be the best investment for cautious investors. But considering the company’s track record of growth in recent years and the emergence of the commercial customer as a major growth driver, the stock makes a great buy for more aggressive investors who aim to hold on for the long run.

Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.