Palantir reported third-quarter revenue of $2.31 billion, marking the first time the company has exceeded the $2 billion threshold. The figure represents a 96% increase year over year and surpassed analyst expectations of $2.18 billion. Adjusted earnings per share reached $0.44, beating the $0.41 anticipated by analysts. Despite the strong financial performance and increased full-year revenue guidance, Palantir shares traded slightly lower on Tuesday as investors reacted to signs of slowing enterprise sales.
In a significant shift for the company, U.S. commercial revenue surpassed U.S. government revenue for the first time. Commercial contracts reached $984 million, a 148% increase from the same quarter last year, while U.S. government revenue stood at $953 million. The growth in the commercial sector is attributed to enterprises adopting Palantir's AI software, which allows for the secure running and custom training of models without sharing data with outside labs.
However, the company's total contract value (TCV) from U.S. enterprises fell to $1.46 billion this quarter, down from a record $2.13 billion in the previous quarter. This decline suggests a deceleration in sales momentum. While corporations are adopting AI software more rapidly, they are increasingly opting for shorter-term trials rather than long-term commitments, allowing for quicker deployment but also easier contract cancellations.
CEO Alex Karp addressed the shift toward shorter contract durations during a quarterly conference call, noting that while deployment is faster, the duration of agreements has decreased. "What Ryan and I are seeing on the front line and commercial is this much quicker interaction, much quicker to deployment, shorter duration of the contract but then an ability to expand that contract dramatically," Karp told analysts.
Karp expressed confidence in the company's ability to expand its footprint despite the changing contract structures. He noted that once customers adopt Palantir's services, they tend to remain with the company. Palantir has increased its guidance for U.S. commercial revenue, projecting it will exceed $3.559 billion, representing a growth rate of at least 143%.
