$PLTR · The Motley Fool · 2026-11-02

Palantir has just released its latest quarterly data, which showed impressive growth across the board, but that wasn't enough for the market. The stock price had fallen by about 3 to 4% at the time this episode was recorded.

Quarterly revenues rose 96% year-on-year. In fact, the second quarter saw year-on-year growth of 93%, which means a further acceleration in revenue growth. Average earnings before interest, taxes, depreciation and amortization amounted to $151 million.

Although this is still amazing, I think many of Palantir’s investors were expecting 100% or more year-on-year growth. I am one of them, so should I be disappointed by the 96% year-on-year growth rate? No, not at all.

If we look at the US commercial sector , we find that it has increased by 148% on an annual basis. For the first time ever, the U.S. commercial sector has become larger than the U.S. government sector.

Not by much, but it remains a sector that exists.

As for the part that showed some weakness, which we will discuss later, it is the total value of US commercial contracts . Let's now compare this quarter with the last quarter.

Let's see what accelerated and what slowed down. Total revenue accelerated by three percentage points. US revenues grew by 119% year-on-year, an increase of four percentage points.

As for revenues in the US government sector, they increased by 96% compared to the previous quarter, equivalent to $378 million.

Net dollar holdings reached 165%, which is already a very high figure of 157. The number of trades valued at over $5 million reached 107, up from 98. Then I will apply the 40 rule, which is 158%.

In the previous quarter, this percentage was 155%.

What slowed down was the total value of US commercial contracts on an annual basis, where the increase fell from 153% to just 11% . The value of remaining business deals in the United States fell from 27% to just 4% compared to the previous quarter.

On the international level, despite the current weakness of this sector , it only witnessed growth of 33 % in the previous quarter and 26% in the current quarter. Regarding the adjusted free cash flow, we need more information about it, perhaps in the quarterly report (10-Q).

We do not know the reason for its decrease from 63% to 53%.

This may be due to poor performance of graphics processing units or data centers, but 53% is still a very good figure. As for new commercial customers in the United States, 38 customers were added in the previous quarter, and 33 customers in the current quarter.

The net profit margin, according to generally accepted accounting principles, increased from 55% to 49%. This is an amazing performance, but it falls within the slowdown period.

As for deals exceeding $10 million in value, 73 deals were added in the previous quarter, and 64 deals in the current quarter. The largest share of the annual growth of 96% comes from the United States, specifically 84% from it.

In the second quarter, revenues from the United States reached 84%, up from 81%. As a result, total revenue increased by 20% compared to the previous quarter.

The business sector in the United States saw growth of 148% year-on-year, and 29% quarter-on-quarter . As for the US government sector, it achieved growth of 96% on an annual basis, and 18% on a quarterly basis.

It is clear here that the United States is the main driver of this commercial activity, unlike international markets .

The business sector in the United States witnessed a remarkable acceleration, adding $220 million in just one quarter, an increase of 29% compared to the previous quarter.

Looking at the revenues of the past twelve months per business customer in the United States, we find that they have increased by 88% year-over-year. Projections for fiscal year 2026 indicate that the U.S. business sector will grow by at least 143%, reaching more than $3.55 billion.

Herein lies the important point: net customer retention has increased to 165%. It is clear, then, that this growth is a result of expansions and not of acquiring new customers.

According to the administration's own statements, it is the ability to deliver , not the demand, that limits the acquisition of new customers. But we have heard the company repeatedly state that demand is not a problem.

If demand is not a problem, and we see huge demand, but we are unable to exploit it or convert it into revenue, then even though their growth is close to 100%, it appears as though they are missing out on huge profit opportunities.

What is the reason? Do they need more full-time employees? Do they need more experts? What is the solution to sustain this rapid growth? Of course, at the moment , and since they are growing very quickly , we have no objection.

But if they experience a real slowdown in growth in the future, as we will see in the next quarter, yes, growth will decrease slightly, but they will still exceed analysts' expectations.

But with this high demand, they seem to be missing out on a lot of opportunities, and this is something that can be easily remedied, because selling software is ultimately not complicated.

We now move on to the part where we are experiencing a slight slowdown, which is in bookings. According to management, the duration of many eight-figure deals was shorter than usual, due to customers' rapid adoption of sovereign artificial intelligence .

The administration expects the duration and size of contracts to increase. This also explains the decline in long-term remaining performance obligations.

Now, before we continue, let's take a look at what happened to this company during the last two quarters. According to Alex Karp, the figure we should be focusing on for 2028 for the US commercial sector is $15 billion.

I know this number seems large, but look at the company's situation not too long ago, and notice this acceleration in growth. This is regarding government sector revenues. If we then move on to commercial revenues, not just American revenues, but total commercial revenues, we will find that they look much better.

Real acceleration and tremendous growth. This is the second consecutive quarter of year-on-year doubling, or more than doubling in fact.

If we look at the revenues of the US government, represented in pink here, and the revenues of the US commercial sector, we will find for the first time that the size of the business of the US commercial sector is larger than the size of the business of the US government.

It is true that the difference is not huge, but it is not bad at all.

Look at the state of the American business sector three years ago. Three years ago, it represented roughly half the size of the U.S. government's business. Now it is a little bigger, and of course growing at a much faster pace.

Looking at revenues for the next quarter, the market is expecting growth of 74.6% year-on-year. Palantir is expected to grow by approximately 90% annually. So, even with this slowdown in growth that the market may have already factored in, it is clear that Palantir is expected to grow at a much faster pace than that .

Looking ahead to the next quarters, the market anticipates a slowdown in the growth of this activity. However, it is still expected to grow significantly, isn't it? These are growth rates exceeding 50%, and if we look at the annual growth rates , we find that the market has not yet reached the level that Palantir predicted for this fiscal year.

As for the next fiscal year, we expect growth of 50% year-on-year, then 44.3% in fiscal year 2028 to reach $17.8 billion . But Alex Karp predicted an annual growth rate of $15 billion by 2028, let's assume it's for the end of 2028.

He was only talking about the business side of the business.

So, yes, Palantir may look very expensive on paper if we look at its futures multiples, but these multiples are based on analysts’ future expectations. It is clear that the analysts' expectations were negative.

Of course, Palantir still has a very large gap in terms of revenue and market value, but when you look at the growth rates and combine them with the company’s profitability, it makes sense, because at this rate Palantir is growing very quickly to match its market value, while generating a large amount of cash, which increases its cash balance, and therefore, it is likely to repurchase a large number of its shares in the long term.

As mentioned, the adjusted free cash flow remained almost unchanged compared to the previous quarter, which implies a slight decrease in profit margins from 63% to 55%. However, the free cash flow margin of 55% is still very good , and the adjusted portion includes a very small part of equity-based compensation.

However , the company ended the quarter with a cash balance of US$10.4 billion and US Treasury bonds with no debt. Palantir expects significant growth in the future, and as we can see, it continues to raise its forecasts for the entire year.

We started with a growth rate of 61%, then 72%, then 82%. We have now reached 91% annual growth. Palantir likes to set goals and exceed them.

So, if we look at the US trade growth target of $15 billion for 2028, let's put together two scenarios, and let's focus on the last quarter of 2028. What will that look like? Well, it's eight-quarters of the day.

This means we will see an average quarterly growth of 15%, which is equivalent to about 75% annual growth. That's possible, is n't it? Over the past eight quarters , the average quarterly growth rate of U.S. trade has been 24%.

Of course, with a smaller base. So, if we look at achieving 15% now, it is possible. If they want to achieve it a little earlier, they will have to raise the growth rate a little.

But for now, if we assume that this figure is for the last quarter of 2028, I think it is achievable.

And remember, we are only talking here about the commercial operating rate in the United States, without taking into account the government or international sector. Therefore, the numbers here, i.e. the projected number by the end of 2028, and perhaps the exit rate, will be interesting .

When you think about it, the stock price may not be so high today.

But as you know, and as you can see in the heat map, anything related to artificial intelligence, rapid growth, semiconductors, or that kind of investment, isn't getting much attention these days.

If we look at what happened during the past week, the picture will become clearer.

But overall, this quarter for Palantir can be summarized as another excellent quarter. It is one of the fastest growing companies, and also very profitable. Some may see it as expensive, while others see it as fair.

I don't think there is a middle ground at the moment.