Palantir Technologies nearly doubled its revenue, beaten every forecast and raised its guidance. Its shares are down 6.2% in premarket trading anyway.
The reason lies not in what the data analytics and AI software company earned last quarter, but in what it signed up for the future. In the jargon, the sales funnel looks a little thin
The headline beat
On the surface, the third quarter was outstanding. Revenue rose 96% to $2.31 billion, comfortably ahead of the $2.18 billion analysts expected.
Fourth-quarter guidance of about $2.65 billion was well above Wall Street's $2.46 billion forecast.
US commercial sales overtook US government sales for the first time, a milestone management described as critical.
The bookings problem
Investors, however, zeroed in on total contract value (TCV), the value of new deals signed in the quarter.
US commercial TCV grew just 11% to $1.46 billion, after soaring 153% in the second quarter. Across the whole company, TCV rose only 6%, down from 49% growth in the previous quarter.
Bookings actually fell 13.4% compared with the second quarter. Remaining performance obligations, the value of contracted work not yet delivered, were flat on the quarter at $4.9 billion.
The number of deals worth at least $10 million fell to 64 from 73.
Duration or demand?
Palantir's explanation is that customers are signing shorter deals because they want to get started on sovereign AI quickly.
Contracts lasting less than a year are left out of remaining performance obligations and turn straight into revenue.
That would explain why revenue is booming while the order book looks flat. Rosenblatt Securities agreed it was a question of contract length, while Baird pointed out that bookings were up against a tough comparison with last year.
Palantir backed its case with examples of small trials turning into big contracts, including a $3 million pilot that became a $29 million annual deal.
Piper Sandler said investors would now want proof over the next few quarters that the slowdown was a quirk of contract timing rather than something more structural. There is also a hint of slowing in the guidance itself.
The fourth-quarter forecast implies revenue growth of about 15% on the third quarter, down from 20%.
The valuation trap
The bigger issue is how much investors were already paying. Palantir has a market value of about $430 billion and trades at roughly 150 times its past year's earnings.
At that level, any sign of slowing growth will be (and has been) punished, however strong the headline figures.
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Insiders have sold more than $97 million of shares over the past 90 days, and the stock had already fallen 10% last week.
RBC Capital, the most bearish broker found using our AI poll, rates the shares a sell with a $90 target, arguing they trade at around 61 times expected 2026 revenue.
Brokers stay supportive
Most analysts looked past the bookings wobble. Our poll found, Piper Sandler nudged its target up to $235 from $231, while Bank of America kept a buy rating and $255 target.
Morgan Stanley raised its target to $233 from $205, but kept its neutral equal-weight rating. Cantor Fitzgerald stayed neutral with a $207 target.
Dan Ives at Yorkville Ives rates the shares outperform with a $250 target and called Palantir one of his top picks for 2027.
He said management had admitted it could not keep up with US demand.
What to watch
The next two quarters will decide whether Tuesday's sell-off was an overreaction.
If short sovereign AI deals turn into larger, longer contracts, as Palantir promises, bookings should bounce back.
If they do not, the order book will start to catch up with revenue, and a share price built on relentless growth will be hard to defend.
