Contract growth lags reported sales
Palantir beat revenue and earnings expectations for the quarter ended September 30, 2026. Yet remaining performance obligations, or RPO, held at $4.9 billion. That was 88% above a year earlier but unchanged from the previous quarter, the first sequential pause since the first quarter of 2023, according to Proactive Investors.
RPO measures contracted revenue that has not yet been recognized. AInvest argued that its lack of sequential growth drew attention away from the 96% increase in quarterly revenue: reported sales reflect earlier contract wins, while the backlog provides a view of business still to be recognized.
New contract value also grew much more slowly than revenue. Palantir's November 2 earnings release reported total contract value of $2.918 billion, a 6% annual increase. The U.S. commercial portion reached $1.463 billion, up 11%.
Deal activity included 212 contracts worth at least $1 million, with 107 worth at least $5 million and 64 worth at least $10 million.
Palantir points to shorter deals
The backlog figures leave two competing interpretations: demand may be slowing at the margin, or contract terms may be changing how much business appears in RPO. Palantir favors the latter explanation, pointing to shorter, eight-figure deals with sovereign-AI customers and the structure of government contracts. Commercial agreements lasting less than a year can convert to revenue sooner without appearing in RPO.
Other measures showed continued expansion. Companywide remaining deal value, a broader measure of contracted future business, increased 55% from a year earlier. U.S. commercial bookings rose more than 60% over the trailing 12 months.
The earnings release put U.S. commercial remaining deal value at $6.517 billion at quarter-end, an increase of 79% year over year and 4% from the previous quarter. AInvest viewed these figures as partial support for the company's explanation, rather than proof that the flat RPO figure was harmless.
Commercial revenue passes government revenue
The quarter also marked a first for Palantir: U.S. commercial revenue exceeded U.S. government revenue. Commercial sales reached $984 million, rising 148% from a year earlier and 29% from the preceding quarter. Government sales totaled $953 million, with annual growth of 96% and sequential growth of 18%, according to the company.
GAAP net income climbed to $1.128 billion, or $0.44 per diluted share, from about $476 million, or $0.18 per share, a year earlier. The net income margin was 49%. Adjusted income from operations totaled $1.427 billion, representing a 62% margin.
Palantir reported a Rule of 40 score of 158%. Deutsche Bank said this was the company's 13th consecutive increase in the measure, according to CNBC.
Higher forecasts meet a demanding valuation
Management raised its full-year 2026 revenue forecast to $8.530-$8.534 billion. For the fourth quarter, it projected revenue of $2.649-$2.653 billion and adjusted income from operations of $1.640-$1.644 billion.
The revised annual outlook calls for U.S. commercial revenue above $3.559 billion, representing growth of at least 143%. Palantir also raised its full-year forecasts for adjusted income from operations to $5.245-$5.249 billion and adjusted free cash flow to $4.8-$5.0 billion.
Those forecasts sit alongside a valuation that assumes sustained rapid growth. AInvest data placed Palantir's market value near $421 billion on November 3. Morningstar's post-earnings analysis put its enterprise-value-to-sales multiple at about 65 and estimated that revenue would need to grow 40%-45% annually for five years to justify the share price while delivering a 10% annual return.
That valuation underpins AInvest's emphasis on the backlog: the investment case depends not only on the record quarter, but also on whether growth can compound for years.
Analysts differ on how much growth to expect
Bullish analysts continued to project substantial gains. UBS had a $250 price target and JPMorgan a $262 target, while Citi's target was $250. UBS raised its estimate for 2027 revenue growth to 70% and said reported revenue offered little evidence of a broader deterioration in demand.
Deutsche Bank maintained a Buy rating and $240 target, while Bank of America retained Buy and a $255 target. Morgan Stanley increased its target from $205 to $233 while keeping an Equal-weight rating. At the bearish end, Jefferies maintained an Underperform rating and an $80 target, according to CNBC and Yahoo Finance reports on November 3.
The next quarter's RPO and contract-value figures will provide further evidence on whether shorter contracts explain the slowdown. In AInvest's assessment, renewed backlog growth would support that explanation; another flat reading alongside rising revenue would heighten concern about the durability of growth.
