Anyone who has owned a hot growth stock knows the odd feeling of watching it fall on good news, whether it comes from earnings or a new deal. Palantir Technologies (PLTR) shareholders felt that again after the company reported third-quarter results on Nov. 2.
Revenue nearly doubled from a year earlier. The value of new contracts Palantir signed barely grew, and that gap now drives the stock.
Revenue rose 96% to $2.31 billion, beating the $2.18 billion analysts expected, according to CNBC. Palantir also guided fourth-quarter revenue above Wall Street’s forecast, Reuters reported.
Total contract value, the lifetime worth of deals signed in a quarter, rose just 6% to $2.92 billion, Palantir said on its earnings call. The same measure grew 49% in the second quarter, according to Palantir’s second-quarter release.
Also read: Palantir is one of just 3 crushed S&P 500 stocks up for the year
The slowdown reached Palantir’s fastest-growing unit, too. U.S. commercial contract value rose 11% to $1.46 billion, according to the company’s earnings release. Revenue from that unit jumped 148%.
Part of that reflects a tough comparison. The figure more than quadrupled a year earlier, according to Palantir’s 2025 release.
Investors noticed. Shares fell 7.8% in premarket trading on Nov. 3, according to CNBC, which cited a William Blair note flagging the slowdown.
Palantir says its new deals are simply shorter
Chief Financial Officer Dave Glazer said the company “signed multiple eight-figure deals in the quarter that were shorter in duration than usual.” He tied that to customers rushing to adopt early sovereign AI features.
Contract value counts every year a deal runs, so a one-year deal books a third of a three-year deal at the same yearly spending level.
Answering Yorkville Ives analyst Dan Ives, CEO Alex Karp described the shift. He said customers now move “much quicker to deployment, shorter duration of the contract, but then an ability to expand that contract dramatically.”
I find that credible, up to a point. Net dollar retention, a gauge of how much more existing customers spend than a year earlier, rose to 165%, Glazer said.
Chief Revenue Officer Ryan Taylor said one athletic company turned a $1.6 million pilot into a roughly $21 million annual deal. The open question is what shorter deals do to the backlog.
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Shorter deals leave Palantir with less cushion
Palantir calls its signed but unbooked U.S. commercial work remaining deal value. That backlog reached $6.52 billion at the end of September, according to the release. By my math, it covers about six-and-a-half quarters of U.S. commercial sales at the current pace.
A year earlier, the same backlog covered more than nine quarters. It grew just 4% last quarter, while U.S. commercial revenue grew 29%, the company said.
Palantir is turning signed work into sales faster than it refills the pipeline. Shorter contracts also give buyers more leverage, because each renewal becomes a fresh decision.
Glazer expects these contracts to grow longer and larger over time. I’d want fourth-quarter proof before giving full credit, and the market seems to agree.
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Wall Street likes the business more than the price
That caution matters because of what investors pay for Palantir. The company’s software helps governments and businesses put their data and AI to work, and analysts have kept raising their targets this year.
The stock has traded between $106.37 and $212.94 over the past 52 weeks. Shares sit well above that low, so investors still price in years of fast growth.
Analysts expected 2026 adjusted earnings of $1.61 per share before the report, according to StockAnalysis. Even after the drop, it trades at roughly 100 times that figure.
Whether that multiple holds up depends on 2027. After the report, UBS lifted its 2027 revenue growth estimate to 70% from 60%, Investing.com reported.
Morgan Stanley raised its forecast to 65% from 45%, Investing.com reported.
Both sit well above the roughly 51% growth analysts expected for 2027 before the report, according to StockAnalysis.
JPMorgan’s Brian Essex, whose $262 target runs to December 2027, argues Palantir is turning AI experiments into real returns, Yahoo Finance reported.
The skeptics are unmoved. RBC Capital’s Rishi Jaluria called Palantir the most expensive stock in RBC’s software coverage before the results, TipRanks reported. Both camps agree on the business and split on the price.
The bull case needs 2027 growth of 65% to 70%, and slower contract signings make that harder to bank on. I believe the next two quarters of bookings will show whether this valuation is justified.
Before the report, StockAnalysis showed a consensus Buy from 32 analysts and a $212.50 average target. Recent calls remain split:
- Outperform, $250 target: Baird reiterated its rating, Investing.com reported.
- Equalweight, $233 target: Morgan Stanley raised its target from $205, according to Investing.com.
- Underperform, $130 target: RBC Capital raised its target from $90 but stayed bearish, Investing.com reported.
Short AI deals could blur the usual growth signals
The bigger lesson reaches past Palantir. Remaining performance obligations, the backlog companies report under accounting rules, leave out contracts with initial terms under 12 months, Glazer noted. Palantir’s total was flat from the prior quarter at $4.9 billion.
If more AI software sells through short first contracts, standard backlog numbers will capture less real demand. Retention and expansion data will matter more than signed contract totals.
Coming quarters will show whether Palantir’s short deals open the door to much bigger ones or give cautious buyers an easy exit. The answer will shape how investors value every AI software company turning pilots into lasting revenue.
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