The AI-driven data analytics company Palantir Technologies has captured Wall Street’s attention after its stocks soared about 14% in its latest Q3 report. 

Palantir’s revenue exceeded analysts’ forecasts as the AI startup reported a third-quarter revenue of over $725 million. The reported figure is about 7% more than its performance from the previous quarter and 30% more than the year before.  

Palantir benefits from a growing AI market 

Speaking about his company’s strong third-quarter numbers, CEO Alexander Karp attributed the performance to the “unrelenting demand for AI.” The AI market has continued to post impressive growth statistics, and companies like Palantir are beneficiaries of the surge in this emerging technology. 

Following the release of the report, the company’s stock shot up by 11%. Its shares are already up about 141% this year. This growth may also be attributed to its recently launched AI platform, which powers AI-driven data analytics across various sectors including the military.

“The world is in the midst of a US-driven AI revolution that is reshaping industries and economies, and we are at the center of it,” said Karp.

Palantir seems well-positioned to take advantage of the increased demand for AI and data analytics in the defense sector. The firm lists the US government as a major customer. Its US commercial revenue is up by 54%, worth about $179 million, while its US government revenue rose by 40%. 

Palantir predicts its 2024 revenue will be around $2.8 billion, and it expects to earn over $767 million in the year’s fourth quarter. 

Following the company’s steep rise in 2024, it joined the S&P 500 index, which tracks the 500 largest companies in the US by market capitalization. 

Wall Street wary of Palantir’s valuation

Palantir is a data analytics and machine learning firm that serves government agencies and commercial customers. It was founded in 2003 by former PayPal CEO Peter Thiel, Alex Karp, and Stephen Cohen.

Palantir’s stocks are currently trading at a price-to-sales ratio of 40 and a price-to-earnings ratio of 246, which appears to be on the high side. Some attribute this overperformance to the “S&P 500 Effect.” This set of analysts also believe the stocks are overpriced and are due to drop eventually. They cite that the shares are currently trading at about 32 times the forecasted revenue for 2025.

However, other analysts expect Palantir’s revenue to grow by 24% in 2024 and 20.6% in 2025. Palantir continues to secure government contracts and now collaborates with all five branches of the US military and the UK’s National Health Service, which would provide a stable stream of revenue and probably help keep its valuation high.

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