Palantir PLTR released its third-quarter earnings report on Nov. 3. Here’s Morningstar’s take on Palantir’s earnings and stock.
Key Morningstar Metrics for Palantir
What We Thought of Palantir’s Q3 Earnings
Palantir is down slightly in after-hours trading after exceeding management’s forecast for nearly all publicized metrics. The rule of 40—the sum of revenue growth and operating margins—reached 114%, an all-time high. US commercial sales grew 121% year over year, up from 92% in the previous quarter.
Why it matters: We are observing a new trend wherein Palantir’s valuation multiple limits market enthusiasm, despite the company’s rapid growth trajectory. We believe Palantir and its ontological framework are leaders in artificial intelligence, but it faces a valuation barrier.
- Palantir trades at roughly 120 times revenue, a 350% premium over other AI companies. We believe the firm requires gradual multiple compression and an average annual growth rate of 45% (90th percentile or above for the software universe) over five years to justify investing at these levels. The risk/reward is poor.
- Our analysis of previous technological innovators dating back to the 1970s shows it is rare for a company to justify this valuation. Palantir may defy the odds, given its top-of-class automated decisioning technologies, but it must grow (and then some) for investors to earn a return from current prices.
The bottom line: We maintain our narrow moat rating and raise our fair value estimate to $135 per share from $115, driven by Palantir’s largest guidance increase in history and our growing confidence that its ontological framework has no clear competitors.
- We believe Palantir is the top software for operationalizing AI, but chasing momentum here is risky. Current pricing leaves no room for error.
Key stats: Palantir’s US commercial growth far exceeded that of the US government (52%) and international segments (32%). Its net dollar retention, which includes customer expansions and upsells, stands at 134%—the best in our software universe. We are impressed.
Fair Value Estimate for Palantir Stock
With its 2-star rating, we believe Palantir’s stock is moderately overvalued compared with our long-term fair value estimate of $135, which implies a 2025 enterprise value/sales multiple of 69 times.
Read more about Palantir’s fair value estimate.
Economic Moat Rating
We believe that Palantir warrants a narrow moat rating, based on switching costs and intangible assets. Companies like AWS, Snowflake, and ServiceNow have developed data analytics tools, but Palantir differentiates itself as the only AI company with a framework that organizes disparate datasets and facilitates optimized decision-making.
Overall, Palantir is an innovative AI company that offers nuanced and optimized solutions derived from the world’s most complex datasets. The company is deeply ingrained within diverse end markets and mission-critical customer infrastructure and has top-of-class net revenue retention metrics that justify a narrow moat rating.
Read more about Palantir’s economic moat.
Financial Strength
We view Palantir’s financial position as healthy and improving. As of June, Palantir had approximately $900 million in cash and $5 billion in marketable securities (mostly US Treasury securities) and no debt. Its liquidity position improved by $700 million thus far in 2025.
Read more about Palantir’s financial strength.
Risk and Uncertainty
We assign Palantir a Very High Uncertainty Rating. The company’s biggest uncertainties come from the broad potential size of the total addressable market that its software can serve and the level of customer penetration it can achieve.
Read more about Palantir’s risk and uncertainty.
PLTR Bulls Say
- Palantir has developed the premier AI software, primed to take advantage of the trend toward digitization and automation. AI software maintains a strategic position on the AI-value chain.
- Palantir’s ontological framework and AI orchestration allow for the democratization of machine learning. Its software is useful to employees at all levels of a business to drive efficiency enhancements.
- The new boot-camp-style sales effort has allowed Palantir to achieve rapid growth in the US commercial segment. The US commercial business has a large total addressable market.
PLTR Bears Say
- Palantir’s end markets are confined to entities that coalesce with Western ethos. This caps the total addressable market.
- The decreasing cost of AI inference and the convergence of LLMs will result in lower barriers to entry in the AI decision-making software industry that Palantir currently dominates.
- Palantir’s dual-class share structure opens the door for overzealous noncore investment opportunities without common shareholders’ checks and balances.
This article was compiled by Frank Lee.
This article was generated with the help of automation and reviewed by Morningstar editors.
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