Hook & thesis
Palantir's share price pulled back from late-2025 highs, but the business underneath is showing accelerating top-line growth, expanding profits and strong cash flow. The move lower is an opportunity to buy rather than a reason to run. My base trade idea: take a tactical long on dips with a firm stop — this is a risk-managed trade, not a blind buy-and-hold.
Why the market should care
Palantir sells analytics software to government and commercial customers via Gotham (government) and Foundry (commercial). The firm is unique in the enterprise AI ecosystem because it combines data integration, model orchestration and mission-tailored deployments for large customers where switching costs matter. That combination explains why Palantir can sustain high gross margins and monetize long-term contracts that are less sensitive to punchy quarter-to-quarter churn than standard SaaS renewals.
What the recent results show (numbers matter)
Palantir's most recent quarter (fiscal Q3 2025, period ending 09/30/2025; filed 11/04/2025) delivered a strong sequential cadence:
- Revenues: $1,181,092,000 in Q3 2025, up from $1,003,697,000 in Q2 and $883,855,000 in Q1 — two consecutive quarterly accelerations.
- Net income: $476,748,000 in Q3 2025, versus $328,572,000 in Q2 and $217,717,000 in Q1 — consistent profit expansion.
- Operating income: $393,256,000 in Q3 2025, implying margins are expanding as revenue scales.
- Operating cash flow was $507,664,000 for the quarter and the company reported positive net cash flow of $693,592,000 in the period, indicating robust cash generation.
- Diluted EPS in Q3 2025 was about $0.18 on a diluted average share base of 2,571,057,000 shares.
Put simply: sequential revenue and profit acceleration plus healthy operating cash flow are the three core fundamentals you want to see when you add risk to a growth stock.
Balance-sheet and liquidity
At the end of the reporting quarter Palantir showed:
- Current assets: $7,586,156,000
- Current liabilities: $1,180,403,000
- Equity: $6,688,269,000
That is a conservative working-capital profile for a software company and supports continued investment in R&D and commercial expansion without imminent liquidity pressure.
Valuation framing
The dataset doesn't include an explicit market-cap number, so any market-cap figure requires an estimated share count. Using the quarter's diluted-average share count (2,571,057,000) times a recent share price near $173.75 produces an approximate market-cap proxy. That method is noisy because diluted-average shares for a quarter are not the same as fully diluted outstanding shares at market close; treat any market-cap math as an approximation.
Even with a rough approach, the key point is qualitative: Palantir currently trades at a premium multiple to legacy enterprise software because investors are paying for two things simultaneously - durable contract economics and optionality in AI platform monetization. That premium is justified if revenue growth and margin expansion continue; it is at risk if growth slows or if AI enthusiasm rotates.
Catalysts that could push the stock higher
- Q4 / Full-year earnings beats and continued sequential revenue growth (next report will re-test the accelerating trend).
- New commercial customer wins or larger deployments at existing commercial customers, which would validate Foundry's scaling.
- Renewal or expansion of large government contracts that reduce revenue concentration risk and underpin predictable ARR.
- Further improvement in operating cash flow or a sustained reversal of large investing outflows into positive cash generation, which would be visible on the cash flow line.
Trade idea - actionable plan
Stance: Tactical long (trade direction: long), time horizon: swing (3–6 months). Risk level: medium.
Entry & sizing:
- Primary entry band: $165 - $176. Current intraday prints near $173.75 make the 165–176 band a sensible buy-the-dip range. Scale in rather than buying full size at one price.
- Position sizing: limit any new position to no more than 3% of portfolio capital for the first leg; add a second smaller leg only if the business confirms continued revenue/profit acceleration on the next print.
Stop and risk control:
- Hard stop: $148. A move below $148 would violate near-term support and erase the sequential-growth narrative; cut quickly to preserve capital.
- Trailing stop: if the trade runs to the first target, trail the stop to breakeven + small cushion to remove delta risk.
Targets:
- Target 1 (near-term): $205 - $210. This is a re-test/extension toward the late-2025 highs where momentum tends to re-accelerate if results keep beating.
- Target 2 (stretch, 6–12 months): $255 - $270. This assumes continued outperformance and some multiple re-rating as AI adoption and large deployments scale.
Risk-reward snapshot: entry around $170 with stop at $148 is ~12.9% downside (risk). Target 1 at $210 is ~23.5% upside (1.8:1 reward:risk). Target 2 at $260 is ~52.9% upside (4.1:1 reward:risk). Those are reasonable asymmetric outcomes for a swing trade if you discipline size.
Risks & counterarguments
Below I list the principal risks and finish with a direct counterargument to the bullish view.
- Valuation risk - Palantir's implied multiples are high versus typical enterprise software because investors are paying for AI optionality. If revenue growth slows or the market rotates away from AI winners, the stock could give back a large portion of its premium quickly.
- Concentration and contract risk - a meaningful portion of revenue continues to come from government and a small number of large commercial customers. Any unexpected non-renewal or budget shift could dent revenue visibility.
- Competitive pressure - hyperscalers and legacy analytics vendors have the balance sheets and AI tooling to compete aggressively. Palantir's differentiation is real, but it is not immune to competition on price or packaging for LLM-enabled features.
- Execution & cadence risk - the bullish case depends on continued sequential revenue and profit acceleration. Misses on top-line or on operating cash flow would remove the primary justification for a premium multiple.
- Macro and liquidity - a broader derating in growth/AI names could amplify downside regardless of company fundamentals.
Counterargument to the trade
One solid counterargument: the market is already pricing future AI consolidation into Palantir, meaning the stock needs flawless execution to justify its premium. If Palantir posts a quarter where revenue growth slows (single-digit sequential growth) or operating margins compress, the premium could collapse and the trade would fail. In that scenario, the right move is to exit to the stop and re-evaluate on the next earnings cycle.
Conclusion & what would change my mind
Conclusion: It's not too late to buy Palantir as a disciplined trade. Concrete reasons: accelerating sequential revenue (Q1 2025 $883.9M -> Q2 $1,003.7M -> Q3 $1,181.1M), rising net income (Q1 $217.7M -> Q2 $328.6M -> Q3 $476.7M), and strong operating cash flow ($507.7M in Q3). Those are the fundamentals that support a tactical long while we wait for the AI story to be proven in commercial deployments.
What would change my mind (sell or pause adding):
- A sustained deceleration in the quarter-to-quarter revenue trend (e.g., Q4 growth well below Q3 sequential growth).
- Material deterioration in operating cash flow or large, unexplained increases in investing outflows without clear strategic rationale.
- Loss of a major government contract or a public competitive defeat on a marquee commercial deal.
Practical wrap - Buy into $165–176, stop at $148, take near-term profits toward $205–210 and consider a stretch target in the $255–270 area if the next two quarters continue to show revenue and operating-profit acceleration. Keep position sizing small and treat this as a tactical exposure to growth + AI optionality with real operational cash strength behind it.
Disclosure: This is a trade idea for educational purposes and not personalized investment advice. Do your own diligence; position size to your risk tolerance.