Palantir Shares Surge on AI Growth, Yet Doubts About Valuation Remain

Shares of Palantir Technologies (NYSE: PLTR) soared to new highs in after-hours trading after the company posted outstanding results for the third quarter of 2025, surpassing analyst forecasts on all major fronts. The stock initially spiked by more than 7% before settling at a 2% increase, reflecting strong investor confidence in Palantir’s AI-fueled expansion and bold revenue projections. However, despite the upbeat report, the stock slipped 2.9% in late trading, indicating that some investors remain wary of the company’s steep valuation, as highlighted in a

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For the third quarter of 2025, Palantir announced total revenue of $1.181 billion, marking a 63% jump from the previous year and beating the $1.09 billion consensus estimate. This impressive growth was largely driven by a 121% surge in U.S. commercial revenue, which reached $397 million, thanks to the rapid uptake of Palantir’s Artificial Intelligence Platform (AIP). The AIP, built to seamlessly embed and scale AI within organizations, has become central to Palantir’s commercial approach, empowering clients to implement large language models and extract meaningful insights from complex data, according to a

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Government business remained robust as well, with U.S. government revenue climbing 52% year-over-year to $486 million. Palantir’s leadership in this arena is reinforced by major contracts, such as a $10 billion deal with the U.S. Army signed in August 2025 and a £1.5 billion agreement with the UK’s defense sector. These significant wins have solidified Palantir’s influence in national security and public sector digital innovation, as detailed in

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The company also raised its full-year 2025 outlook, now expecting revenue between $4.396 billion and $4.400 billion, representing a 53% annual increase. For the fourth quarter of 2025,

projects revenue to range from $1.327 billion to $1.331 billion, a 61% year-over-year rise. This is the strongest sequential revenue growth guidance Palantir has ever issued, according to . The company reported an adjusted operating margin of 51% and achieved a Rule of 40 score of 114%—a metric that combines growth and profitability and places Palantir ahead of most enterprise software competitors, as also noted by Investing.com slides.

Palantir’s financial strength was further demonstrated by strong cash flow, with $540 million in adjusted free cash flow and a 46% margin. The company secured 204 contracts worth at least $1 million each, including 53 deals over $10 million, bringing total contract value to $2.76 billion—a 151% increase from the prior year, according to an

. CEO Alex Karp highlighted the “transformative effect” of AIP, stating, “114%—our Rule of 40 score! These results clearly demonstrate the compounding power of AI in enterprise operations,” as .

Nevertheless, the stock’s decline after the earnings release reflects ongoing concerns about its valuation. With a price-to-sales ratio of 85—the highest in the S&P 500—investors are questioning whether Palantir’s rapid growth can justify such a premium. Analysts like Gil Luria from D.A. Davidson remarked, “All these numbers are disconnected from the fundamentals,” while others pointed out that updated 2026 guidance will be crucial to maintain momentum, as previously reported by Yahoo Finance.

Palantir’s achievements have also heightened competition in the AI and data analytics industry. Competitors such as Snowflake (NYSE: SNOW), Databricks (private), and major cloud providers like Microsoft (NASDAQ: MSFT) and Amazon (NASDAQ: AMZN) are under pressure to keep up with Palantir’s integrated AI offerings. Key partners, including NVIDIA (NASDAQ: NVDA), are poised to benefit from the growing need for AI infrastructure as Palantir’s AIP continues to gain market share, as mentioned in the MarketMinute article.

Looking forward, Palantir plans to capitalize on its partnerships and AI innovations to expand into industrial AI and space technology—areas expected to see substantial growth by 2030. Still, the company faces hurdles such as regulatory challenges around data ethics and the ongoing need to accelerate international commercial expansion. For now, Palantir’s third-quarter performance has reinforced its status as a frontrunner in the AI sector, with its stock likely to remain in the spotlight for investors navigating the fast-evolving tech landscape.