According to Fortune, Palantir delivered blockbuster quarterly earnings on Monday with third-quarter revenue hitting $1.2 billion, representing 63% year-over-year growth and beating analyst expectations of $1.09 billion. The company reported $476 million in net income, up 40% from the previous year, with U.S. commercial customer business driving much of the growth by expanding 121% year-over-year to $397 million. Despite CEO Alex Karp’s triumphant declarations calling these “arguably the best results that any software company has ever delivered,” shares fell approximately 3.5% in after-hours trading following the announcement. The company’s “Rule of Forty” metric reached 114%, far exceeding the 40% threshold considered strong performance, while regulatory filings revealed that prominent short seller Michael Burry has taken positions against both Palantir and NVIDIA. This impressive financial performance comes amid growing questions about sustainability.
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The Valuation Reality Check
Palantir’s rich valuation presents a fundamental challenge that even stellar quarterly numbers cannot easily overcome. Trading at premium multiples compared to traditional software companies, Palantir must maintain extraordinary growth rates simply to justify its current market capitalization. The 63% revenue growth, while impressive, may not be sufficient to satisfy investors who have priced in near-perfect execution for years to come. The stock’s 400% run-up over the past year means expectations were already sky-high, creating a classic “sell the news” scenario where even beat-and-raise quarters fail to propel shares higher. This dynamic is particularly dangerous for companies whose valuations depend on continued exponential growth.
Commercial Growth: Sustainable or Seasonal?
The 121% explosion in U.S. commercial business deserves closer scrutiny. While Palantir has successfully positioned itself as an AI infrastructure provider, much of this growth appears concentrated in large enterprise deployments that may not recur at the same pace. The company’s partnership with NVIDIA, while strategically sound, represents a crowded competitive space where numerous software companies are racing to integrate AI capabilities. More concerning is the lack of transparency around customer diversification—Palantir declined to name companies beyond Lowe’s that have adopted the NVIDIA-integrated platform, suggesting the customer base for these premium offerings may be narrower than investors hope. Commercial AI adoption cycles tend to be lumpy, and Palantir may be experiencing a peak that proves difficult to sustain.
Michael Burry’s Warning Signal
The revelation that Michael Burry has established short positions against both Palantir and NVIDIA, as detailed in SEC filings, should give investors pause. Burry’s track record of identifying overvalued technology sectors—most famously during the dot-com bubble and 2008 financial crisis—suggests he sees systemic overvaluation in the AI infrastructure space. His simultaneous bets against both companies indicate a broader skepticism about the AI boom’s sustainability rather than company-specific concerns. When a historically successful short seller targets high-flying tech stocks, it often signals that the easy money has been made and that risk is accumulating beneath the surface of seemingly unstoppable momentum.
Karp’s Leadership: Asset or Liability?
Alex Karp’s increasingly political and confrontational rhetoric introduces additional execution risk. His comments about fentanyl and cultural fragmentation during the earnings call, while perhaps resonating with certain stakeholders, potentially alienate portions of the commercial customer base and investor community. As Palantir seeks to expand beyond government contracts into mainstream enterprise software, maintaining political neutrality becomes increasingly important. Karp’s shareholder letters, filled with literary references and philosophical musings, sometimes read more like performance art than corporate communication—a style that may wear thin with institutional investors focused on consistent execution rather than charismatic leadership.
The Crowded AI Platform Space
Palantir faces intensifying competition from cloud providers and enterprise software companies all racing to offer similar AI capabilities. Amazon Web Services, Microsoft Azure, and Google Cloud Platform are embedding AI directly into their infrastructure stacks, potentially making standalone AI platforms like Palantir’s less essential over time. The company’s historical reliance on custom implementations and high-ticket consulting also creates scalability challenges compared to more standardized SaaS offerings. As AI capabilities become increasingly commoditized, Palantir’s premium pricing and implementation model may face pressure from more affordable, self-service alternatives.
Realistic Investment Outlook
For all its impressive metrics, Palantir remains a high-risk, high-reward investment at current valuations. The company must continue delivering quarterly surprises simply to maintain its stock price, creating enormous pressure on the sales organization. The government business, while stable, grows at more modest rates, meaning the commercial segment must carry an increasingly heavy growth burden. Investors should watch for signs of commercial customer concentration, implementation timeline extensions, and any moderation in growth rates as early warning signals. While Palantir’s technology and positioning remain strong, the stock’s reaction to this earnings report suggests the market is beginning to price in the substantial execution risk ahead.
