Palantir Technologies Inc. (PLTR) Q3 2026 earnings review
Palantir's US business sales double, but new contract signings stall
Palantir's software sales to American businesses overtook its US government sales for the first time, even as new contract signings slowed sharply. Revenue nearly doubled from a year ago to $2.31 billion, and operating profit rose faster because hiring and overhead stayed lean. Chief executive Alex Karp raised the full-year outlook again, with fourth-quarter sales planned at 88% growth.
| Revenue | $2.31B +96% from a year ago |
|---|---|
| US commercial revenue | $984M +148% from a year ago; now bigger than US government |
| Total contract value closed | $2.92B +6% from a year ago, down from +49% last quarter |
| Full-year revenue outlook | Raised $378M middle of the range: 91% growth |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because booming revenue conversion from existing backlog collided with a sudden slowdown in newly signed contract value. Raising the full-year US commercial floor proves that deals signed earlier this year are turning into revenue faster than our prior math suggested. The caution: total contract value closed grew just 6% from a year ago, and US commercial backlog added $279 million against $1.32 billion last quarter.
The question now is whether the third-quarter dip in contract signings is just a shift toward shorter deal terms or the first sign that the initial corporate AI buying wave is peaking. If customers are simply signing shorter starter deals, fourth-quarter renewals will refill the backlog; if budgets are digesting, backlog growth will keep sliding toward revenue growth. Fourth-quarter contract signings and the first 2027 outlook will settle it.
🐂 Bull Case
US Businesses Now Outspend the Pentagon
"Our U.S. commercial revenue has surpassed our U.S. government revenue for the first time in our company’s history," chief executive Alex Karp said. Palantir started as a defense contractor, and it now sells data software to corporate clients faster than to federal agencies.
- US commercial revenue: $984 million, up 148% from a year ago and 29% from last quarter
- US government revenue: $953 million, up 96% from a year ago and 18% from last quarter
- Revenue outside the US: $376 million by our math, up 26% from a year ago
Both American branches accelerated from last quarter, so commercial growth did not come at the expense of defense work. Instead, rapid corporate adoption lifted total sales past $2 billion in a single quarter for the first time.
What to watch: fourth-quarter US commercial revenue against the $1,216 million floor implied by the full-year outlook. Beating that mark would show existing corporate projects are expanding into full factory and office rollouts.
Sales and Overhead Costs Fell as Revenue Doubled
Palantir nearly doubled its top line while adding much less to its daily running costs. Because the software group closes deals without a traditional army of sales reps, every expense line shrank as a share of revenue, lifting operating margin by 13.6 percentage points from a year ago to 46.9%.
- Sales and marketing (advertising and sales staff): 17.1% of revenue, down 6.1 percentage points from a year ago
- General and administrative (corporate overhead): 9.9% of revenue, down 3.8 percentage points
- Research and development (engineering): 9.5% of revenue, down 2.7 percentage points
- Cost of revenue (hosting and customer support): 16.6% of revenue, down 1.0 percentage point
Excluding one-offs—mostly employee stock awards and related payroll taxes—operating profit reached $1.43 billion, or 61.7% of sales. That beat the company's own third-quarter plan by 10.3% by our math, even after seasonal summer hiring.
What to watch: sales and marketing as a share of revenue in the fourth quarter. A reading near 17% would confirm Palantir can close year-end corporate renewals without hiring an expensive traditional sales force.
Positives this quarter didn't test
Two product pillars from earlier quarters stayed central to the pitch, though the earnings release gave no standalone numbers for them.
- Customer-controlled AI models: Karp said Artificial Intelligence Platform (AIP), the company's software for connecting AI models to corporate operations, now uses "ontologized, fine-tuned open-weight models"; disclosing direct revenue from model training would test whether customers pay extra for it.
- Defense platform depth: US government sales rose 96%, but the release did not update builder counts for the Maven battlefield system; the quarterly filing or presentation will show whether new defense programs are joining.
🐻 Bear Case
New Contract Bookings Almost Stopped Growing
"The Sovereign AI moment is purpose-built for Palantir," Karp wrote in the release. Sovereign AI is the company's pitch that businesses must own their AI workflows rather than rent them, and Karp frames current demand as an urgent land grab.
Yet the value of new contracts signed in the quarter barely budged from a year ago. Total contract value (TCV), the lifetime potential of deals closed in the period, grew just 6%, down from 49% growth last quarter and 151% a year ago.
- Total TCV closed: $2.92 billion, up 6% from a year ago and down 13% from last quarter by our math
- US commercial TCV closed: $1.46 billion, up 11% from a year ago and down 31% from last quarter
- US commercial remaining deal value (RDV, total unbilled backlog): $6.52 billion, adding $279 million vs $1.32 billion added last quarter
- Deals of $10 million or more: 64 closed, down from 73 last quarter
Revenue is booming today because Palantir is working through huge contracts signed over the past year. If new deal signings stay near single-digit growth while backlog additions slow, revenue growth will eventually have to follow them down.
What to watch: fourth-quarter total TCV against last year's $4.26 billion fourth-quarter record. A year-over-year decline in the biggest booking quarter of the year would show the initial corporate AI buying wave is digesting.
The Fourth-Quarter Plan Points to Slower Growth
Three months ago Karp stated a goal of keeping company-wide growth at or above the US commercial pace—nearly 150%—for the next 18 months. The formal fourth-quarter outlook tells a much calmer story.
Palantir forecasts $2.649 billion to $2.653 billion in fourth-quarter sales, which equals 88.4% growth from a year ago at the middle of the range, down from 95.9% in the third quarter. Meanwhile, the raised full-year US commercial floor of $3.559 billion leaves at least $1,216 million for the fourth quarter by our math, or 23.6% growth from the third quarter.
What to watch: the initial full-year 2027 revenue outlook, which arrives with fourth-quarter results in February. That number will settle whether management budgets for triple-digit expansion or a step-down as comparisons toughen.
Idle Cash Tops $10 Billion as Stock Pay Climbs
Palantir now holds $10.56 billion in cash and US Treasury securities on its balance sheet with zero debt, up from $7.18 billion at the end of December. Despite an existing share buyback authorization, the cash flow statement shows zero stock repurchases across the first nine months of 2026.
At the same time, stock-based compensation—equity grants paid to employees—rose 85% from a year ago to $318.9 million in the quarter, or 13.8% of revenue. Because the company is not buying back shares to offset those grants, the diluted share count ticked up to 2.574 billion.
What to watch: share repurchase activity and stock compensation in the annual report. Continued silence on how to use $10.6 billion in cash leaves shareholders absorbing ongoing equity dilution.
Risks this quarter didn't answer
Several standing risks either grew alongside the US business or depend on disclosures outside the earnings release.
- US and federal budget concentration: American customers drove 83.7% of revenue (up from 81% last quarter), and the US government alone accounted for 41.2%, where most contracts allow termination "for convenience"; any federal funding delay hits two-fifths of sales.
- Competition from AI model makers: the release gave no win-rate figures against frontier AI labs building their own enterprise workflow tools.
- Implementation partner capacity: the release named no new consulting partners to ease the bottleneck in forward-deployed engineers.
- Founder control and call scrutiny: the three founders retain up to 49.999999% voting power through Class F stock, and the webcast Q&A remains the test for whether management takes tough analyst questions.
👓 Other Themes
Tariffs and Rates Remain Formal Risk Factors
Palantir did not blame the economy for any slowdown in its results, and its high cash balance actually benefited from interest rates, earning $88.9 million in interest income during the quarter. In its forward-looking risk disclosures, however, the company warned that fluctuating interest rates, foreign currency swings, and potential tariffs or trade disputes could hurt the operations and budgets of its commercial customers and partners.
💲 Other KPIs
Cash generation held above $1.2 billion for a second quarter, rising 125.3% from a year ago. Palantir defines this metric as operating cash flow ($1,204.6 million) plus cash paid for payroll taxes on employee stock awards ($19.5 million), minus $8.0 million in equipment purchases. That equals 52.6% of revenue, down from 63% last quarter as uncollected customer bills rose.
Money owed by customers for billed work jumped 87.2% from a year ago by our math and 26.8% from June's $1,485.2 million balance. That $398 million single-quarter increase absorbed cash flow in the third quarter, though receivables are still growing slightly slower than the 95.9% revenue pace.
Cash collected upfront for software service not yet delivered reached $693.9 million in total deferred revenue (up 92.4% from a year ago by our math) plus $512.8 million in customer deposits. Combined upfront balances rose 13.2% from June's $1,065.8 million total, lagging sequential revenue growth of 19.5%.
🔮 Guidance
Raised against the ~ $2.424 billion fourth-quarter figure implied by last quarter's full-year plan. The new range calls for 88.4% growth from a year ago and 14.6% growth from the third quarter at the middle of the range. Palantir has beaten its next-quarter midpoint seven times in a row by an average of 6.6%; if the pattern holds, fourth-quarter sales would reach about $2.825 billion by our math.
New. The plan puts fourth-quarter operating profit excluding stock pay at $1.642 billion in the middle of the range, up 105.6% from a year ago by our math. That represents a 61.9% operating margin, slightly above the 61.7% delivered in the third quarter.
Raised. Management lifted the middle of the full-year sales plan by $378 million, pointing to 90.6% growth for the year. It is the third raise this year following increases of $466 million in the first quarter and $498 million in the second quarter; the fourth-quarter raise adds the $151 million third-quarter beat plus $227 million for the final quarter.
Raised. The floor moved up by $135 million, calling for at least 143% growth this year against 134% previously. By our math, with $2,343 million already booked across the first three quarters, the floor leaves at least $1,216 million for the fourth quarter—up 140% from a year ago and 23.6% from the third quarter.
Raised. The middle of the full-year profit target rose by $354 million, implying a 61.5% full-year margin. With $3,604.9 million earned in the first nine months, the remaining fourth-quarter slice matches the standalone $1.642 billion fourth-quarter outlook.
Raised. The company lifted its annual cash flow range by $300 million to a $4.9 billion middle. By our math, after generating $3,361.1 million through September, the outlook leaves $1,538.9 million for the fourth quarter—up 94.5% from a year ago and implying a 58.1% fourth-quarter cash margin as billed receivables convert to cash.
❓ Key Questions
Why did new contract signings slow to 6% growth?
Total contract value closed grew 6% from a year ago and US commercial contract signings rose 11%, down from 49% and 153% in the second quarter. Did customers sign shorter contracts, or did the pace of new multi-year expansions cool after a big summer?
Where did RPO, customer counts, and retention land?
The earnings release did not include remaining performance obligations (RPO), net dollar retention (157% last quarter), or customer counts, which usually appear in the investor presentation and filing. What are those three readings for the third quarter?
Did one customer drive the $398 million receivable increase?
Uncollected customer bills rose from $1.49 billion in June to $1.88 billion in September. Last quarter, a single unnamed customer accounted for 27% of all receivables; did that concentration rise again in the third quarter?
What is the plan for the $10.6 billion cash pile?
Palantir now holds $10.56 billion in cash and Treasury securities with zero debt and has not bought back a share all year, even as stock compensation rose 85% to $319 million. What will management use the cash for?