Palantir Q3 2025 Earnings: Record Growth Amid Valuation Concerns

This analysis is based on the Wall Street Journal live coverage [1] published on November 4, 2025, which reported Palantir’s after-hours stock decline following Q3 2025 earnings announcement.

The event presents a striking dichotomy between Palantir’s exceptional operational performance and market reaction. Despite reporting record-breaking metrics across all key categories, PLTR initially fell 2.9% in after-hours trading to approximately $201.50 [2], though it rebounded strongly during regular trading to close at $207.18 (+3.35%) on November 4 [0]. This pattern reflects the market’s struggle to reconcile stellar fundamentals with extreme valuation concerns.

Palantir delivered extraordinary Q3 2025 results that significantly exceeded analyst expectations [4]:

• Total revenue: $1.181 billion (+63% YoY, +18% QoQ)
• U.S. commercial revenue: $397 million (+121% YoY, +29% QoQ)
• U.S. government revenue: $486 million (+52% YoY, +14% QoQ)

• GAAP operating income: $393 million (33% margin)
• Adjusted operating income: $601 million (51% margin)
• Adjusted EPS: $0.21 vs. consensus $0.17

• Rule of 40 score: 114% (exceptional efficiency)
• Total contract value: $2.76 billion (+151% YoY)
• Customer count: +45% YoY growth

The company also raised guidance significantly, projecting Q4 2025 revenue of $1.327-$1.331 billion and full-year 2025 revenue of $4.396-$4.400 billion [4].

Despite these stellar results, the market reaction was initially negative due to extreme valuation metrics [0]:

• P/E ratio:
  641.98x (exceptionally elevated)
• Market cap:
  $471.18 billion
• Year-to-date performance:
  +175.54%
• Analyst consensus price target:
  $165.00 (-20.4% from current)

The initial after-hours decline and continued weakness in European trading (PLTR fell nearly 6% in early Frankfurt trading) [6] suggest that valuation concerns are outweighing fundamental performance in the short term.

The 121% YoY growth in U.S. commercial revenue raises questions about sustainability. While AI-driven demand is accelerating [4], maintaining such explosive growth rates becomes increasingly challenging as the base expands. The Rule of 40 score of 114% indicates strong operational efficiency, but investors are clearly pricing in continued exceptional performance.

Palantir operates in an increasingly competitive AI landscape where major technology companies are developing alternative platforms. The company’s ability to maintain its technological edge and pricing power will be crucial for justifying current valuation multiples.

Notable institutional skepticism emerged with Michael Burry’s Scion Asset Management disclosing a 5 million-share equivalent put position worth approximately $912 million [8]. Only 24% of analysts rate PLTR as Buy [6], indicating significant professional skepticism despite strong fundamentals.

The event highlights broader market dynamics around high-multiple growth stocks. Even exceptional operational performance may not overcome valuation concerns when expectations are elevated [6][7]. The technology sector showed mixed performance amid AI valuation concerns, suggesting sector-wide reassessment of growth stock valuations.

1. Valuation Risk:
   The P/E ratio of 641.98x suggests extreme growth expectations are already priced in [0]. Any slowdown in growth could trigger disproportionate price declines.

2. Growth Sustainability Risk:
   Maintaining 121% U.S. commercial growth rates in 2026 presents significant challenges as the revenue base expands.

3. Competitive Risk:
   Emerging AI alternatives from major tech companies could pressure Palantir’s market position and pricing power.

4. Government Dependency Risk:
   Potential policy changes affecting defense spending could impact Palantir’s substantial government revenue stream.

1. Execution Excellence:
   Continued delivery on raised guidance could validate current valuations over time.

2. AI Market Expansion:
   Accelerating AI adoption across industries provides significant tailwinds for Palantir’s platform.

3. Operational Efficiency:
   Strong Rule of 40 performance and expanding margins demonstrate sustainable business model advantages.

4. Market Leadership:
   Palantir’s established position in government and commercial AI platforms provides competitive moats.

Palantir’s Q3 2025 results demonstrate exceptional operational performance with record revenue of $1.181 billion (+63% YoY), strong profitability (51% adjusted operating margin), and explosive U.S. commercial growth (+121% YoY) [4]. The company raised full-year guidance to $4.396-$4.400 billion revenue, indicating confidence in continued momentum.

However, the stock’s extreme valuation (P/E: 641.98x) [0] and initial negative market reaction suggest that growth expectations are elevated. The forward P/E of 253x remains exceptionally high even for growth stocks [6], creating vulnerability to any growth deceleration.

Key monitoring factors include Q4 2025 execution against raised guidance, competitive developments in the AI space, government spending patterns, and changes in institutional positioning. The divergence between fundamental performance and market reaction reflects broader uncertainty around high-multiple growth stock valuations in the current market environment [6][7].

The stock’s year-to-date performance of +175.54% [0] versus analyst consensus price target of $165.00 (-20.4% from current) [0] indicates significant professional skepticism despite strong operational metrics, suggesting that current valuations may be pricing in continued exceptional performance that may be difficult to sustain.