Shares of Palantir surged over 12% on Tuesday after the company raised its yearly revenue forecast for the third time. This boosted investor confidence, showing that the ongoing AI boom is driving demand for its services.
Notably, Palantir has emerged as one of the leading beneficiaries of the generative AI wave, with its stock more than doubling in value this year—a sharp rise that has raised some concerns about its high valuation.
However, Monday’s strong results eased some of these concerns. Demand increased for the company’s AI platform, which supports tasks like code testing, debugging, and evaluating AI scenarios. The company’s government-focused services, including software to visualize military positions, also saw high demand.
In response, Palantir lifted its revenue forecast for 2024 to between $2.805 billion and $2.809 billion, up from its previous range of $2.742 billion to $2.750 billion.
In the third quarter, U.S. government contracts generated a 40% revenue jump for Palantir, contributing over 44% of its total sales of $725.5 million.
“We see a long runway of growth in the government sector, owing to the massive demand for AI-first solutions across governmental functions such as the military and healthcare,” Morningstar analysts said.
However, the analysts cautioned that the stock’s recent surge in value means that “any bump in the road, such as sales execution challenges or weaker-than-expected top-line growth or guidance, could materially affect the stock’s valuation.”
If premarket gains remain steady, Palantir’s market value could climb by $12 billion by the day’s end.
Currently, Palantir trades at a forward price-to-earnings ratio of 95.43, compared to 25.60 for Oracle and 126.92 for Snowflake. This year, Palantir’s stock has outpaced the S&P 500 index and was recently added to the benchmark index in late September.
