Hiding inside Palantir’s skyrocketing quarter is a foreboding signal

Palantir delivered such a huge third-quarter earnings report on Monday that its press release even bragged that the numbers were “crushing consensus expectations.”

Yet, retail investors were lukewarm on the company on Tuesday, with the stock trading slightly down. That’s because Palantir’s enterprise sales, its big growth area, showed signs of slowing.

First, the good news for the company’s investors. Revenue grew 96% year over year to $2.31 billion, the first time it has ever surpassed the $2 billion mark. Palantir’s revenue, which also grew 20% from the previous quarter, beat analysts’ expectations of $2.18 billion. Palantir also reported adjusted earnings per share of $0.44 versus analysts’ expectations of $0.41. The company even upped its revenue guidance for the full year. Normally, that alone would send a stock soaring.

The clincher was that Palantir’s U.S. commercial revenue surpassed U.S. government revenue for the first time ever. The company reported $984 million in commercial contracts (up 148% from the year-ago quarter), versus $953 million in U.S. government revenue.

The reason for all this love from enterprises? They are signing up for the company’s AI software that can run frontier models and custom-train open-weight models securely, without sharing any of their data and business processes with outside AI labs. Plus, Palantir has always offered what is today known as “forward-deployed” software engineering, which helps customers customize its wares.