By Palantir Technologies PLTR shares fell in premarket trading on Tuesday despite the company delivering a strong third-quarter earnings beat.
The reaction came despite Palantir reporting its first quarterly revenue above $2 billion and raising its full-year outlook.
Rather than looking at the earnings, investors focused on a sharp slowdown in new contract growth and questioned whether its rapid expansion in the artificial intelligence market can be sustained.
The stock had dropped nearly 3% on Monday and extended its losses in premarket trading on Tuesday, falling as much as 8%.
Strong earnings and revenue growth
Palantir reported third-quarter revenue of $2.313 billion, up 96% from a year earlier and above Wall Street expectations of approximately $2.18 billion.
It was the company’s first quarter with revenue exceeding $2 billion.
Adjusted earnings came in at 44 cents per share, beating the analyst consensus of 41 cents.
The company’s US commercial business was a major contributor, with revenue surging 148% to $984 million.
For the first time in its history, US commercial revenue exceeded US government revenue, which reached $953 million during the quarter.
Palantir also raised its full-year 2026 revenue guidance to approximately $8.53 billion, implying annual growth of around 91%.
It expects fourth-quarter revenue between $2.649 billion and $2.653 billion, comfortably above the roughly $2.46 billion analysts had anticipated.
Slowing contract growth raises concerns
The main source of investor disappointment was the deceleration in total contract value (TCV), which measures the value of contracts signed during the quarter.
Palantir’s total TCV increased just 6% year over year to $2.918 billion, compared with 49% growth in the second quarter.
US commercial TCV rose 11% to approximately $1.46 billion, a sharp slowdown from 153% growth in the previous quarter.
The figures raised questions about whether new customer commitments are keeping pace with the company’s rapidly expanding revenue.
Investors will be watching upcoming quarters to determine whether the slowdown reflects the timing and duration of individual contracts or a more sustained moderation in demand.
Analysts flag bookings slowdown
William Blair highlighted the deceleration as a potential disappointment, while Piper Sandler said investors would look for evidence that the weaker US commercial TCV growth was temporary.
The brokerage nevertheless believes demand for Palantir’s solutions continues to exceed supply.
Morgan Stanley raised its price target to $233 while maintaining an Equalweight rating, indicating that the brokerage remained cautious despite the company’s strong reported growth.
Vital Knowledge analysts said Palantir’s earnings and cash flow figures were strong, but the slowdown in contract value could leave investors underwhelmed.
Baird also reiterated an Outperform rating and a $250.00 price target for the stock.
Palantir generated $1.22 billion in adjusted free cash flow during the quarter, representing a 53% margin.
However, the market reaction suggests investors are increasingly looking beyond headline earnings beats and demanding evidence that new contract growth can sustain the company’s expansion.
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