Palantir’s stock has defied gravity, delivering steady performance that no other AI software stock has come close to matching (yet). For investors, the Palantir thesis is two-fold: the company must continue to scale its Commercial segment after posting multiple quarters of over 50% growth, while also sustaining a high valuation. Both matters and the bar is undeniably high.
What separates Palantir, however, is not simply growth, but capability. The differences matter as unlike traditional AI-enabled database or business intelligence competitors, Palantir can operate effectively even when data sets are incomplete or fragmented—situations where most models struggle. In that regard, traditional business intelligence companies require a complete data set, whereas Palantir can handle situations where one isn’t available. You can think of the competitive advantage as actionable depth, as Palantir has described it: “the reasoning that goes into decision-making, not just data.”
Palantir’s Artificial Intelligence Platform (AIP) integrates generative AI with operational data and workflows, and, when combined with Palantir’s other platforms, Foundry and Apollo, it provides an AI service mesh that can run hundreds of microservices, scale compute via its Rubix engine, and orchestrate updates through Apollo.
Additionally, Palantir’s knowledge graph, referred to as Ontology, is a distinct advantage. The graph offers better context than a large language model would on its own – or as Palantir states, it’s “the reasoning that goes into decision-making.” Palantir made key upgrades to AIP with the introduction of AI-forward-deployed engineers (FDEs) and the AI Hivemind, and brought Ontology to the edge, enabling deployment on mobile devices.
Palantir Stock leads the AI software pack, delivering one of the best reports across tech in Q3. Revenue accelerated nearly 15 points sequentially to almost 63%, with strong growth in key metrics and a 28-point acceleration in US Commercial revenue to 121% YoY. The Artificial Intelligence Platform (AIP) is driving most of the Commercial growth, as there was a clear revenue inflection when AIP launched in mid-2023.
The company reported strong key metrics, with net retention rate (NRR) expanding six points sequentially to 134%. Over the past two years, NRR has risen an impressive 27 points, and Palantir noted that AIP is continuing to drive existing expansions and new customer conversions. On the other hand, Palantir’s forward P/S ratio trades at an outstanding 67.5.
Below, I discuss what you need to know about Palantir, and the hotly debated stock.
New Product Upgrades – AIP FDEs, Hivemind and Edge Ontology
Palantir made a handful of upgrades to its AIP and Ontology in Q3, unveiling AIP forward-deployed engineers (FDEs) in beta, AI Hivemind, and Edge Ontology, all aimed at accelerating AI deployment with its customers.
AI FDEs builds upon Palantir’s take on software engineers, the forward deployed engineer, which sit at the intersection of software, sales, and platform engineers, embedding within customer teams to closely develop and tailor AI software and solutions directly to their needs. Palantir now brings this to AIP, with the AI FDEs being its AIP-native deployment AI agent that “understands how to connect to data sources, how to integrate and transform data, how to create ontologies and functions and build applications.” AI FDEs function in conversational commands, allowing customers to easily turn requests into autonomously executed Foundry operations.
Palantir says the AI FDEs are increasing productivity for customers, noting that at one customer, two of its human FDEs utilized AI FDEs to migrate to a legacy data warehouse in five days, a task which Palantir says would normally have taken up to two years.
AI Hivemind is a new tool within AIP that Palantir says will orchestrate a “swarm of dynamically generated agents to tackle hard problem solving, idea generation refinement and executable proposal generation that is integrated with Ontology and therefore aware of the context of your enterprise.” Palantir says the tool was developed to help government clients solve extremely complex problems with classified data (such as generating intricate mission plans), but it has already been tested by commercial clients to help “identify bottlenecks to their supply chain, proactively developing possible solutions and then leveraging AI FDE to code that up into an actual solution.”
Edge Ontology is Palantir’s new, lightweight Ontology that allows it to run on mobile devices, letting customers build mobile apps or embedded software for hardware such as robots or drones. Edge Ontology is also fully integrated with AIP. While Palantir was very thin on details, it’s likely tied to its existing partnership with Qualcomm, where the two brought Ontology to edge devices powered by Qualcomm’s Dragonwing processors. This partnership focused on the industrial, auto and manufacturing sectors, and remote and offline environments.
Together, the new product upgrades reflect Palantir’s dedication to continuously improve its platform and help customers consistently solve problems daily. Financially, the three new upgrades can help accelerate deployments and adoption of AIP, help secure more (and potentially larger) contracts, and tap into new markets such as IoT at the edge.
Financials
Revenue Accelerates Nearly 15 Points to 63% YoY
Palantir reported $1.18 billion in revenue in Q3, up by an impressive 18% QoQ and beating estimates by 8.4%, driven by unwavering momentum in US Commercial. On a YoY basis, revenue growth accelerated 14.8 points to 62.8% YoY, the largest sequential acceleration to date and marking Palantir’s highest growth rate since going public. Over the last nine quarters, topline growth has accelerated ~50 points, from just 12.7% in Q2 2023, a rare feat to accomplish.
For Q4, Palantir guided revenue up 60.6% YoY to $1.327 to $1.331 billion, well ahead of estimates for 44.2% growth to $1.19 billion. While this does represent a marginal deceleration at face value, this sequential deceleration is in line with trends from previous quarters.
For the full year, Palantir raised its revenue outlook to $4.396 to $4.40 billion, pointing to YoY growth of 53.5% at midpoint, a sharp acceleration from 29% growth in 2024. To put in perspective the strength of this acceleration, Palantir had initially guided for just 30.9% growth to $3.76 billion in revenue back in Q4 2024; growth is now more than 22 points faster.
Impressive 28 Point Acceleration in US Commercial Revenue to 121% YoY
Palantir’s US Commercial segment is generally seen as the primary vector for its AIP-driven growth, with robust momentum only accelerating further in Q3.
US Commercial revenue grew 29% QoQ and 121% YoY to $397 million in Q3, accelerating from 93% YoY growth in Q2. Since the start of the year, US Commercial growth has accelerated 50 points, and since the start of 2024, growth has accelerated 81 points.
For the full year, Palantir significantly boosted its US Commercial growth outlook to >104% YoY, up from 85% previously. This corresponds to revenue of $1.433 billion, up from $1.302 billion previously.
Key metrics for the segment were very strong: TCV closed (total contract value) surged 342% YoY to a record $1.31 billion, and TTM TCV was $3.8 billion, up 217% YoY. Remaining deal value (RDV) rose 199% YoY and 30% QoQ to $3.63 billion. US Commercial deals closed of >$1 million were up 2X YoY and deals closed of >$5 million were up 5X YoY.
Palantir Key Segments – Government and Commercial Revenue
Q3 also marked the first time Commercial growth outpaced Government segment growth since Q2 2024, fueled by the robust momentum and sharp acceleration in US Commercial as discussed above.
Commercial revenue rose 21.5% QoQ and 73% YoY to $548 million, a 26-point acceleration from 47% YoY growth last quarter. International Commercial revenue was ~$151.7 million in Q3, up ~10% YoY and 5% QoQ.
Government revenue rose 14.5% QoQ and 55% YoY to $633 million, a six-point acceleration from 49% YoY in Q2. Government remained Palantir’s largest segment at ~53.6% of revenue. US government revenue was up 52% YoY and 14% QoQ to $485.9 million, while International Government revenue was ~$146.8 million, up nearly 66% YoY and 16% QoQ.
Other Key Metrics – NRR Expands, Strong Customer Growth
Palantir had a handful of other strong key metrics that support strong revenue growth continuing despite the sharp acceleration the company delivered in Q3.
