A lot of ink has been spilled in the previous weeks Palantir Technologies’ (PLTR 4.49%) financial liberation and much of it was decidedly negative. The stock has had an epic run over the past two years, gaining 545% since the start of last year due to accelerated adoption of artificial intelligence (AI). This was accompanied by a commensurate increase in Palantir’s valuation, with some on Wall Street sounding the alarm.

The company released its results after the market closed on Nov. 4, and to say Palantir beat expectations might be an understatement. The data mining and AI specialist eclipsed even the high-end of analysts’ expectations and punctuated its success report by raising full-year guidance.

While many on Wall Street have been amazed by the magnitude of Palantir’s performance, one analyst predicted that many are underestimating the company’s strength.

Let’s take a look at Palantir’s results and what they mean for the future.

Image source: Getty Images.

Firing on all cylinders

For the third quarter, Palantir generated $726 million in revenue, up 30% year-over-year and up 7% quarter-on-quarter. This resulted in adjusted earnings per share (EPS) of $0.10, which was up 43%. To put the results into context, analysts’ consensus estimates called for revenue of $701 million and EPS of $0.09, so Palantir easily cleared both hurdles.

The results were fueled by US commercial revenue, which rose 54% year-over-year and 13% sequentially — well ahead of management’s guidance for growth of at least 47%. US government revenue did its part, rising 40%.

Customer values ​​were equally robust. Palantir’s customer base grew 39% year-over-year, driven by a 77% increase in US commercial customers. The company also fueled future growth, closing 104 deals worth at least $1 million. Of these, 36 were worth at least $5 million, and 16 were worth at least $10 million.

Palantir has not only driven robust current growth, but also laid the foundation for a profitable future. The company’s remaining performance obligation (RPO) — or sales not yet recorded as revenue — rose 59% year over year to $1.6 billion. It’s good news when RPO is growing faster than current revenue because it suggests the company’s growth has legs.

Palantir’s secret weapon was its Artificial Intelligence Platform (AIP), which experimented robust customer request. The company has taken a unique approach, hosting bootcamps that pair users with Palantir engineers to ensure they develop viable solutions. The evidence is undeniable. Management noted numerous seven-figure deals that were signed within weeks of those clients attending one of Palatir’s training sessions.

To put the icing on the cake, Palantir management raised the company’s full-year revenue estimate to $2.8 billion, which would represent a 26% year-over-year increase after several consecutive quarters of accelerated growth. Palantir also raised its adjusted profit and free cash flow forecasts. The biggest contributor to its more bullish outlook is the US commercial segment, as management now forecasts 50% growth, up from management’s 40% growth forecast issued earlier this year.

One analyst was not at all surprised

Wedbush analyst Dan Ives was not at all surprised by the result. In September, longtime bull Palantir noted that “more and more enterprises” were discussing how they would implement AIP in 2025. Ives said at the time that Palantir’s “enterprise-led AIP strategy” (was) a clear “game changer” for the Palantir story. ,” warranting an Outperform (Buy) rating and a $45 price target. The call came as some analysts went on the sidelines, citing Palantir’s high valuation.

Following Palantir’s breakout performance, which Ives called “a masterpiece,” the analyst raised his price target to $57. He cited “unprecedented demand” for his upbeat interpretation, also noting the accelerated rate of “new customer conversions and expansion of existing offerings.”

These results validate Ives’ (and my) optimistic view. To be clear, not all investors will see Palantir stock as an opportunity, especially since the stock is currently selling at about 140 times forward earnings. Given its high valuation and inherent stock volatility, any failure — real or perceived — could send Palantir crashing back down to earth. If in doubt, check the stock chart between 2021 and 2023, when Palantir lost nearly 73% of its value.

The market for generative AI is expected to be worth between $2.6 trillion and $4.4 trillion over the next decade, according to global management consultancy McKinsey & Company. If Palantir can win even a small slice of this opportunity — and I think it is possible — the stock will be worth it much more five to ten years down the road.

Given its consistent execution, massive opportunity and growing profitability, I think Palantir is a buy. For those put off by high stock valuations, look for opportunities to buy any weakness or simply buy average cost in dollars in stock.