Hook & thesis
Palantir is no longer a speculative, pre-profitoritity name; it is a profitable, cash-generating software company that has earned the right to be valued as such. The company's Q3 fiscal 2025 filing (filed 11/04/2025) shows revenue of $1.181 billion, operating income of $393 million and GAAP net income of $477 million. Those are not rounding errors - they mark a clear inflection in the business model.
That shift simplifies the investment decision: this is a classic risk-reward setup where the fundamental runway (rising revenues, widening operating margins, strong operating cash flow) justifies a long trade with clearly defined stops and targets. Below I outline why the market should care, back the argument with numbers, frame valuation, list catalysts and risks, and finish with an actionable trade plan you can size to your risk tolerance.
What Palantir does - and why the market should care
Palantir sells two core platforms: Foundry for commercial customers and Gotham for government customers. The value proposition is plain: connect messy operational data into an analytical layer that improves decisions and productivity. For investors, that translates to high gross margins, recurring contract economics and a long runway across defense, critical infrastructure and enterprise digital transformation.
Why should investors care now? Because the company is converting that revenue into profit and cash. In Q3 fiscal 2025 (period ended 09/30/2025) Palantir reported:
- Revenues: $1,181,092,000 (Q3 2025)
- Operating income: $393,256,000
- Net income: $476,748,000
- Diluted EPS: $0.18 (diluted EPS 0.18 per share)
- Operating cash flow: $507,664,000 (net cash flow from operations, continuing)
Those figures show accelerating scale. Compare sequential quarters in 2025: revenue was $883.9M in Q1, $1,003.7M in Q2 and $1,181.1M in Q3; operating income moved from $176.0M to $269.3M to $393.3M over the same three quarters. The business is growing top line while expanding margins - the tidy setup investors want to see.
Support from the balance sheet and cash flow
The balance sheet looks conservative in the dataset: total assets of $8.11396B and liabilities of $1.425691B as of Q3 2025. Current assets were $7.586156B, giving the company ample liquidity for product investment and potential opportunistic capital allocation. Operating cash flow of $507.7M in the quarter confirms that the company is generating real cash, not just accounting earnings.
Valuation framing
The dataset does not provide an official market capitalization line item, so I estimate market value using the last trade price on 01/12/2026 (last trade 178.67) and the diluted average shares reported in Q3 2025 (2,571,057,000 shares). That implies an approximate market capitalization of about $459 billion (2.571057B * $178.67 = ~ $459B). Use this as an estimated guide only; the data source did not include a formal market cap figure and quarterly diluted shares are a moving number.
Valuation logic: at this revenue run-rate (Q3 revenue annualized = ~$4.72B) and positive GAAP profit, the market will try to price Palantir like a high-growth software company with margin expansion potential. If you annualize Q3 2025 revenue to roughly $4.7B, then the estimated implied enterprise valuation (using the rough market cap above) suggests a high multiple of revenue - which is why disciplined trade sizing and clear stop levels matter. If the market rewards accelerating growth and margin durability, the multiple can expand further; if growth stalls, the multiple will re-rate lower quickly.
Catalysts (2-5)
- Continued commercial expansion and upsells on Foundry - sequential revenue growth in 2025 shows traction across customers.
- Renewals/expansions in government contracts that underpin Gotham - defense and allied-government demand provides a reliable baseline.
- Margin leverage as R&D and SG&A scale slower than revenue - operating income rose substantially quarter-to-quarter in 2025.
- Operator-friendly macro: AI and analytics spending by enterprises remains a tailwind to license and implementation revenues.
- Potential capital return or opportunistic M&A using a strong balance sheet if management chooses to allocate cash to share repurchases or tuck-ins.
Risks and counterarguments
No trade is without risk. Here are the principal risks I see today:
- Valuation sensitivity - the implied valuation (using diluted shares and current price) is high relative to many software peers on a revenue multiple. If growth decelerates, downside could be swift.
- Concentration and political/regulatory risk - sizable government exposure and the company's declared policy to work only with Western-allied entities introduce geopolitically-driven revenue risk or contracting delays.
- Competitive pressure - larger cloud and AI incumbents could replicate parts of the stack or compete on price for enterprise spend.
- Churn or execution - commercial expansion depends on measurable customer outcomes; higher-than-expected churn or slow sales cycles could compress forward guidance.
- Accounting/shares dynamics - diluted share counts are large and can change; using diluted shares to estimate market cap is an imperfect method and can overstate market value if not adjusted for share-class specifics.
Counterargument: Even with strong recent profitability, skeptics can point to the high multiple investors implicitly pay for Palantir's revenue. If the market reverts to a lower multiple because other AI/software names disappoint or macro investor risk appetite falls, Palantir could underperform despite strong fundamentals.
Actionable trade idea (entry, stops, targets)
My recommendation is a structured long with size tailored to risk tolerance. This is a swing-to-position trade: expect to hold from 3 months to 12+ months depending on how catalysts play out.
| Plan | Details |
|---|---|
| Trade direction | Long (buy to open) |
| Entry | Primary entry: $170 - $180 (current last trade 01/12/2026: $178.67). If you prefer a lower-risk entry, scale in between $155 - $170 on weakness. |
| Initial stop | Hard stop: $150. Technical/mental stop: close below $150 triggers exit for the full position. This caps downside given recent trading ranges and preserves capital should sentiment shift. |
| Targets | Target 1 (swing, 3–6 months): $230 - take ~50% off position. Target 2 (position, 9–12 months): $270 - scale out remainder. Adjust if company issues materially better/worse guidance. |
| Position sizing | Size the initial entry so that the distance to stop (~$28 from $178 to $150) equals a comfortable % of your portfolio (e.g., 1-2% risk). Add on confirmed fundamental/catalyst-driven strength. |
| Time horizon | Swing (3–6 months) with a position sleeve for a 9–12 month horizon if growth and margin trends continue. |
Why this risk/reward makes sense
Recent quarterly trends show topline acceleration (Q1 -> Q2 -> Q3 2025: $883.9M -> $1,003.7M -> $1,181.1M) and operating income expansion ($176M -> $269M -> $393M). Coupled with robust operating cash flow (Q3 operating cash flow $507.7M), Palantir is proving the classic software flywheel: revenue growth + margin expansion = cash. That combination supports a multiple re-rating if management sustains growth and investors reward durability.
What would change my mind?
- Negative trigger - a quarter with falling or flat revenue versus prior quarter and a material decline in operating cash flow would make me exit and reassess.
- Political/regulatory shock - loss of a major government contract or an adverse ruling that meaningfully restricts operations would invalidate the thesis.
- Gross margin erosion - if cost of revenue or other operating expenses rise faster than revenue, suggesting scaling problems, I would downgrade the trade and tighten stops.
Conclusion
Palantir has moved from potential to performance. The dataset-backed numbers for Q3 fiscal 2025—$1.181B revenue, $393M operating income, $477M net income and $507.7M operating cash flow—are the strongest evidence a bull can ask for. That said, valuation sensitivity and political/regulatory exposures require disciplined sizing and a hard stop. For traders who want exposure to fast-growing, profitable AI/analytics software with a clear playbook, the plan above offers a simple, pragmatic way to participate while keeping downside defined.
Disclosure: This is not investment advice. Use the data above as part of your own research and adjust sizing to fit your risk tolerance.
Quick reference
- Last trade (01/12/2026): $178.67
- Q3 FY2025 revenue (to 09/30/2025): $1,181,092,000 (filing 11/04/2025)
- Q3 FY2025 operating income: $393,256,000
- Q3 FY2025 net income: $476,748,000
- Q3 FY2025 operating cash flow: $507,664,000