PLTR Q3 Deep Dive: U.S. AI Demand and Enterprise Adoption Drive Major Upside, Market Reacts Negatively

Data analytics company Palantir Technologies (NASDAQ:PLTR) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 62.8% year on year to $1.18 billion. On top of that, next quarter’s revenue guidance ($1.33 billion at the midpoint) was surprisingly good and 11.2% above what analysts were expecting. Its non-GAAP profit of $0.21 per share was 25.5% above analysts’ consensus estimates.

Is now the time to buy PLTR? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Despite Palantir Technologies surpassing Wall Street’s expectations for revenue, non-GAAP profit, and operating income in Q3, the market responded negatively, with shares declining notably post-earnings. Management attributed the quarter’s strong results to rapid expansion in the U.S. commercial segment, especially as more enterprise clients accelerated adoption of the AIP (Artificial Intelligence Platform). CEO Alex Karp and Chief Revenue Officer Ryan Taylor noted a significant increase in large, organization-wide deals, highlighting the urgency among customers to transform operationally with AI. Taylor emphasized that “customers are converting to larger enterprise agreements in short time frames,” reflecting a shift toward broader AI deployments across entire businesses.

Looking forward, Palantir’s raised guidance relies on continued momentum in enterprise AI adoption, particularly in the U.S. The company expects its AIP to remain a central growth engine, as organizations increasingly seek to integrate advanced AI capabilities into core operations. Management believes sustained investment in product development and technical hiring will support this trajectory, with CFO David Glazer stating, “Accelerating demand for AIP continues to drive the outperformance in our U.S. business overall.” However, the company acknowledged the need to maintain its unique internal culture and product focus to keep pace with rising customer expectations and evolving market demands.

Key Insights from Management’s Remarks

Palantir’s management identified rapid U.S. commercial adoption and product advancements in AIP as primary drivers of the quarter’s outperformance, while also noting the impact of new large-scale enterprise contracts.

• U.S. commercial acceleration: The company saw exceptional growth in its U.S. commercial business, attributed to urgent demand for enterprise-wide AI transformation. Management cited a medical device manufacturer that expanded its contract eightfold within five months, exemplifying how organizations are quickly scaling AI deployments after initial pilot phases.
• AIP product differentiation: Palantir’s Artificial Intelligence Platform (AIP) was highlighted as a key differentiator, with management arguing that AIP is unique in enabling customers to achieve “compounding AI leverage” across their operations. CTO Shyam Sankar pointed to new features like AI Hivemind and Edge Ontology, which allow customers to automate complex workflows and extend AI capabilities to mobile and embedded devices.
• Expansion of large enterprise deals: The quarter included Palantir’s highest-ever total contract value (TCV) bookings, with an increasing number of deals above $5 million and $10 million. Taylor emphasized the shift from isolated use cases to comprehensive, organization-wide agreements, driven by C-suite level engagement.
• Government momentum and mandates: U.S. government business grew substantially, helped by official directives such as the U.S. Army’s mandate to consolidate data platforms on Palantir’s Foundry and AIP. This move is seen as both a technological and cultural shift in government IT strategy.
• Internal productivity gains: Management credited internal productivity improvements—driven by AI-native tools and the Field-Deployable Engineer (FDE) model—for enabling revenue growth without proportional increases in headcount. Sankar explained that empowering both employees and customers with AI-driven development tools allowed for faster onboarding and deeper platform adoption.

Drivers of Future Performance

Management’s outlook centers on sustained U.S. commercial momentum, further enterprise adoption of AIP, and ongoing investments in product capabilities and technical talent.

• Enterprise AI adoption: The company expects demand for organization-wide AI solutions to remain strong, with management highlighting that more clients are seeking rapid, comprehensive digital transformation. Taylor noted that customers increasingly “want to reorganize their entire organization around Palantir and AIP,” which management sees as a critical growth engine.
• Product innovation and scalability: Continued investment in AIP features—such as AI Hivemind and Edge Ontology—are expected to drive further differentiation and customer expansion. Sankar described how these advances enable users to solve complex problems, automate new workflows, and support use cases at the edge (for example, on mobile devices and drones).
• Operational discipline and culture: Management identified maintaining Palantir’s unique internal culture and close alignment with customer needs as essential for sustaining performance. CEO Alex Karp stressed that the company’s ability to scale revenue and profitability with relatively flat headcount depends on keeping its engineering-focused, problem-solving approach intact.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be watching (1) the pace at which new and existing enterprise customers expand AIP deployments beyond pilot projects, (2) whether internal productivity gains can continue to offset headcount growth and support margin expansion, and (3) further mandates or large-scale contracts from U.S. government agencies adopting Palantir platforms. Progress in international markets and additional product innovations may also influence performance.

Palantir Technologies currently trades at $191.42, down from $207.47 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

Our Favorite Stocks Right Now

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.