Palantir Earnings Preview: AI Bellwether Faces Its Biggest Test Yet

When Palantir Technologies (PLTR) reports third-quarter earnings after the close, it won’t just be another software update for Wall Street—it will be a referendum on the broader AI trade itself. The data analytics company has become a cornerstone of market sentiment in 2025, embodying the promise and valuation risk of artificial intelligence’s corporate adoption. With shares up 128% year-to-date, Palantir ranks as the fifth-best performer in the S&P 500, trailing only Micron, Seagate, Western Digital, and Robinhood. That run-up leaves little margin for error: the stock trades at an eye-watering 248x forward earnings and nearly 90x forward sales, making tonight’s report a high-stakes moment for both the company and the AI narrative driving equity markets.

Analysts expect another strong quarter, with revenue forecast to grow 51% year over year to $1.09 billion, building on last quarter’s record-breaking $1.00 billion result—a 48% annual increase. Adjusted EPS is projected at $0.17, up nearly 70% from last year. Palantir has now exceeded revenue expectations in 19 of its last 20 quarters, but even that consistency hasn’t guaranteed smooth sailing; post-earnings stock reactions have averaged a 15% swing in either direction. The bar this quarter is especially high, given the stock’s premium valuation and near-perfect investor expectations for its AI platform’s growth trajectory.

Key metrics to watch will include total revenue growth, commercial bookings, government segment expansion, and operating margins. Investors are particularly focused on Palantir’s U.S. commercial business, which surged 93% year over year in Q2 and is expected to remain the primary growth driver. Analysts at Morgan Stanley and Piper Sandler see potential for another 56–58% year-over-year topline increase in Q3, citing durable channel momentum, rapid new-customer onboarding, and accelerating use-case expansion within Palantir’s Foundry and AIP (Artificial Intelligence Platform). Morgan Stanley expects the company to modestly raise full-year guidance again, while RBC remains skeptical, flagging valuation risk and deceleration concerns into Q4. Citi, maintaining a Neutral/High-Risk rating, predicts revenue upside in the ~5% range and a smaller full-year revision, consistent with slowing but still robust momentum.

Last quarter’s numbers set a formidable benchmark. Revenue hit $1.004 billion, surpassing estimates by 7%. GAAP net income reached $327 million (a 33% margin), and adjusted operating margins expanded to 46%. The company generated $569 million in free cash flow with a 57% margin—exceptional profitability metrics for a high-growth software name. Customer count rose 43% year over year to 849, total contract value soared 140% to $2.3 billion, and net dollar retention climbed to 128%. Palantir also posted a “Rule of 40” score of 94, cementing its position as one of the few AI software firms combining hypergrowth with profitability.

Palantir’s key drivers remain split between two engines: its expanding commercial footprint and entrenched government relationships. On the commercial side, its AIP platform has rapidly become the cornerstone of enterprise AI adoption. Through partnerships with Oracle, Snowflake, and Nvidia, Palantir has positioned itself at the center of operational AI deployment. The recent collaboration with Nvidia is particularly important—it integrates Nvidia’s accelerated computing and Nemotron models directly into Palantir’s ontology framework, allowing faster, more scalable industrial AI implementations. This partnership also aligns Palantir’s software with Nvidia’s upcoming Blackwell architecture and AI factory designs for government clients, strengthening both its technical depth and its defense sector visibility.

Government contracts continue to underpin the company’s growth floor. In Europe, Palantir recently won a £750 million, five-year deal with the U.K. Ministry of Defence and pledged £1.5 billion in investments toward next-generation AI defense technology. It also signed a letter of intent with Poland’s Ministry of National Defense and expanded its NATO relationship through deployment of its Maven Smart System across all 32 member states. These wins underscore CEO Alex Karp’s long-standing vision of Palantir as a foundational AI defense contractor for Western allies—a positioning reinforced by U.S. Army CIO Leonel Garciga’s recent comments calling Palantir a “core platform” for the Army’s AI modernization efforts.

Despite its enviable growth, Palantir’s valuation remains the central debate. Piper Sandler, which lifted its price target to $201, argues that defined contract visibility above $7 billion and accelerating triple-digit commercial bookings justify the premium. BofA Global Research took an even more bullish tone, raising its target to $215 on confidence in the company’s Agentic AI capabilities and expanding enterprise use cases. Yet RBC Capital Markets countered with a $45 price target, warning that even with 50%+ growth, shares discount years of perfection. That divergence—$45 on the low end to $215 on the high—reflects the polarization that defines Palantir’s investment story.

Last quarter’s management tone was nothing short of euphoric. COO Shyam Sankar called Palantir’s AIP “software our customers are building their software on,” signaling the platform’s evolution from tool to ecosystem. CFO David Glazer touted record profitability and raised full-year revenue guidance to $4.15 billion, while Karp described the quarter as “once in a generation.” The upcoming Q3 report will test whether that exuberance holds under the weight of soaring expectations.

The risks are clear: macro uncertainty could weigh on enterprise IT budgets, international growth remains uneven, and political exposure—from its outspoken stance on U.S. defense and immigration policy to its alignment with the Trump administration—could pose reputational challenges. Yet AI spending remains resilient, and Palantir’s position at the intersection of data, defense, and industrial digitization offers a unique moat.

Heading into tonight’s print, Palantir is expected to once again deliver impressive results. But at this valuation, “impressive” might not be enough. The market’s message is simple—execution must remain flawless. Whether Palantir’s earnings reaffirm the AI boom or puncture it will say a lot about where sentiment heads next.