<\/p>\n
Palantir Technologies (PLTR) has created a problem most companies would love to have: Wall Street now expects it to crush expectations.<\/p>\n
MarketBeat expects $2.18 billion in revenue and 41 cents per share from the AI software company’s third-quarter results after the market closes Nov. 2. Revenue would increase 84% year over year.<\/p>\n
Palantir’s own prediction is less optimistic. Wall Street has successfully factored another beat into its expectations ahead of the report, as management guided for $2.160 billion to $2.164 billion in sales.<\/p>\n
This disparity contributes to the explanation of an odd division among experts.<\/p>\n
Citi raised its Palantir price target to $250 from $245 on Oct. 22 and expects U.S. commercial revenue to grow more than 140%, according to TipRanks.<\/p>\n
But Investing.com, citing StoneX, reported that the firm maintained a Hold rating, even as it also expected a strong quarter. StoneX said investors may focus less on whether Palantir beats estimates than on how large the upside is.<\/p>\n
Both companies anticipate Palantir’s success. The point of contention is how much positive news investors should already anticipate.<\/p>\n
Palantir’s growth has made a beat the baseline<\/p>\n
Investors have several reasons to expect even better results from Palantir.<\/p>\n
Second-quarter revenue surged 93% year over year to $1.94 billion, while U.S. commercial revenue jumped 149% to $764 million. U.S. government revenue rose 90% to $809 million.<\/p>\n
The company also closed 220 deals worth at least $1 million during the quarter, including 98 worth at least $5 million and 73 worth at least $10 million.<\/p>\n
With adjusted free cash flow of $1.22 billion, the margin was 63%.<\/p>\n
Palantir reported that U.S. commercial residual deal value, or contractual work that hasn’t yet been recorded as revenue, increased 124% to $6.24 billion.<\/p>\n
These figures complicate the value argument beyond just labeling Palantir as pricey.<\/p>\n
Investors often expect that the company’s growth will ultimately support an exceptionally high stock-market value. However, every extraordinary quarter also complicates the subsequent comparison.<\/p>\n
Palantir raised its full-year revenue guidance after the second quarter to $8.150 billion to $8.158 billion, representing roughly 82% growth. It also expects U.S. commercial revenue to exceed $3.424 billion, or grow at least 134%.<\/p>\n
Despite increasingly challenging year-earlier comparisons, Citi now anticipates that business will expand by more than 140% in the third quarter.<\/p>\n
Citi’s checks with Palantir partners showed strong demand across U.S. commercial and government businesses, according to TipRanks.<\/p>\n
That makes U.S. commercial growth particularly important on Nov. 2. Palantir doesn’t only need businesses to test its AI software. Customers must increase such deployments and continue to convert AI initiatives into bigger contracts to maintain the bull case.<\/p>\n
Citi believes that is taking place, and StoneX doesn’t contest the momentum.<\/p>\n
The more difficult issue to assess is how much momentum Palantir’s stock already reflects.<\/p>\n
Palantir expects U.S. commercial revenue to exceed $3.424 billion, or grow at least 134%.<\/p>\n
John Lamparski \/ Getty Images<\/p>\n
Palantir’s valuation changes what counts as good<\/p>\n
Palantir trades at 41.6 times its forecast 2027 enterprise value-to-revenue ratio, according to Investing.com.<\/p>\n
For a Main Street investor, the implication matters more than the Wall Street terminology.<\/p>\n
For every $1 in revenue that StoneX projects Palantir will make in 2027, investors are allocating almost $41 in enterprise value.<\/p>\n
A 100% revenue growth company can command a higher multiple than a typical software company. When growth slows, large deals fall, or management lowers investor optimism, a high multiple means the market is less patient.<\/p>\n
Palantir shares closed at $196.19 on Oct. 22, about 8% below their $212.94 52-week high. Investing.com shows 21 Buy ratings, nine Holds, and two Sells, with an average 12-month price target of $206.43.<\/p>\n
Related: Palantir’s Pentagon role reveals a surprising edge<\/p>\n
That average implies only modest upside from the Oct. 22 close, even though some individual analysts see much more.<\/p>\n
An excellent example is Citi’s new $250 objective. In essence, the bank is making the case that Palantir can continue exceeding projections quickly enough to sustain further gains.<\/p>\n
Investors are urged by StoneX’s Hold recommendation to take into account the opposing viewpoint: Excellent performance alone can’t warrant a new rating when a company already exhibits years of exceptional development.<\/p>\n
As a result, Nov. 2 is more of an expectations test than a straightforward profits test.<\/p>\n
Demand is genuine, according to Palantir’s second-quarter data. Another concern that has to be addressed in the third quarter is whether demand can keep growing fast enough to outpace what investors have already factored in.<\/p>\n
What Palantir has to prove on Nov. 2<\/p>\n
The first criterion is the most straightforward. Revenue must meet Wall Street’s standards, not just Palantir’s.<\/p>\n
The maximum amount recommended by management is $2.164 billion. About $2.18 billion is what analysts anticipate.<\/p>\n
Therefore, a result that falls between those two figures may theoretically surpass Palantir’s prediction while still disappointing investors.<\/p>\n
Here, StoneX’s caution over the magnitude of the upside becomes crucial.<\/p>\n
U.S. commercial growth is the second test. The company’s 149% second-quarter growth is one of the best indications that Palantir’s AI potential is expanding beyond its long-standing government business and into corporate America.<\/p>\n
Citi anticipates growth exceeding 140% once again. If Palantir produces anything at that rate, it will bolster the claim that companies are using its AI platform more widely rather than just testing it.<\/p>\n
More Palantir:<\/p>\n
Palantir’s latest AI move reveals a much bigger ambition<\/p>\n
Palantir faces a $330 million test U.S. investors should watch closely<\/p>\n
UBS resets Palantir stock price target for the rest of 2026<\/p>\n
Large contracts provide a third test.<\/p>\n
Palantir closed 73 deals worth $10 million each in Q2. StoneX advised investors to watch large-deal activity and net retention, which measures whether existing customers are spending more.<\/p>\n
These two figures approach the same problem in different ways. Gaining new clients is important, but Palantir’s value increasingly demands that current clients expand their deployments while new clients sign more significant contracts.<\/p>\n
Lastly, investors need to pay attention to what management says about the fourth quarter.<\/p>\n
A significant third-quarter beat combined with a notably slower projection may swiftly divert focus from Palantir’s recent achievements to the potential rate of growth normalization.<\/p>\n
Overall, it can be the most significant figure that management provides to investors.<\/p>\n
Palantir has already shown that there is a market for their AI software. It has not yet shown how long growth beyond 80%, 100%, or even 140% in some areas of the business can continue as the revenue base grows, since no company can do so in a single quarter.<\/p>\n
Because of this difference, Citi and StoneX may both anticipate a strong quarter, even if they have conflicting opinions on the stock.<\/p>\n
Investors do not need to act as if Palantir is inexpensive in the bull scenario. Palantir’s performance must continue to make the current value seem less drastic over time.<\/p>\n
The danger is almost identical to the mirror counterpart.<\/p>\n
It is not necessary for Palantir’s business to decline for the stock to suffer. Growth only has to fall short of the very high standards set by its prior success.<\/p>\n
That is the real test on Nov. 2.<\/p>\n
Although another strong quarter is anticipated for Palantir, it is unclear whether it will deliver another quarter that is strong enough to lead Wall Street to raise its expectations again.<\/p>\n
Related: Palantir CTO says AI researchers took up smoking to prove a hypothesis<\/p>\n
#Palantir #stock #faces #brutal #test #crushing #expectations<\/p>\n","protected":false},"excerpt":{"rendered":"
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