Hook & thesis
Palantir is running what I call the "114% Rule" — when certain commercial cohorts adopt the company's bootcamp model, initial engagements more than double year-over-year and economics snap from break-even to high-margin within a few quarters. The most recent quarter (fiscal Q3 2025, filed 11/04/2025) produced another leg of that move: revenue of $1.181 billion, operating income of $393 million and free-operating cash flow that keeps the balance sheet pristine. Those are the raw ingredients for a parabolic breakout in a stock that already trades like a growth poster child.
This is a trade idea, not a value call. I am long for a tactical swing: the combination of accelerating revenue (Q1->Q2->Q3 2025) and rapidly expanding operating income suggests Palantir can re-rate quickly if the market continues to rotate into AI / application-layer winners. I offer an explicit entry, stop and target plan below — with the usual caveats about valuation and headline risk.
What Palantir does and why the market should care
Palantir operates two principal platforms: Foundry (commercial) and Gotham (government/defense). The company sells analytic and AI-enabled software that sits at the application layer — not infrastructure. That placement matters: buyers see product-led, mission-critical deployments, not discretionary tools. Management has leaned into a “bootcamp” model for commercial accounts — intensive implementation and co-development that drives adoption, embeds technology and produces predictable expansion inside accounts.
Why the market should care: this business combines subscription-like revenue retention with large initial implementation fees that convert into high gross profit once the software is live. The recent quarters show the model shifting from 'potential' to 'repeatable': an expanding gross profit base, rising operating income and strong operating cash flow. Those fundamentals are exactly what fuels fast multiple expansion when investor sentiment is bright for AI application winners.
Hard numbers that matter (selected recent quarters)
| Quarter (fiscal) | Revenues | Gross profit | Operating income | Diluted EPS | Operating CF |
|---|---|---|---|---|---|
| Q1 2025 (01/01/2025 - 03/31/2025) | $883,855,000 | $710,885,000 | $176,048,000 | $0.08 | $310,263,000 |
| Q2 2025 (04/01/2025 - 06/30/2025) | $1,003,697,000 | $810,763,000 | $269,317,000 | $0.13 | $539,251,000 |
| Q3 2025 (07/01/2025 - 09/30/2025, filed 11/04/2025) | $1,181,092,000 | $973,785,000 | $393,256,000 | $0.18 | $507,664,000 |
Two simple takeaways from the table above: (1) revenue growth is accelerating — Q1 -> Q2 was ~13.6% sequential, and Q2 -> Q3 was ~17.7% sequential; (2) operating income and cash flow are scaling, implying operating leverage is turning on as revenue increases.
Valuation framing
Market data shows the stock trading around $184.18 on 12/30/2025. Using the company-reported diluted average shares for Q3 2025 of 2,571,057,000 (reported in the 11/04/2025 filing), a naive market-cap proxy is roughly $470–475 billion (price * diluted shares). That makes Palantir look extremely rich on a headline basis versus revenue unless you assume a very high growth and margin pathway.
To be pragmatic: if you annualize the latest quarter (Q3 revenue $1.181B) you get a run-rate of roughly $4.7B. The implied price-to-sales on the naive market-cap estimate approaches the triple digits — a number normally reserved for the highest-conviction AI winners. So this trade is not a value pick; it's a sentiment and execution trade. If management continues to convert bootcamp deployments into large, multi-year contracts with strong gross margins and durable retention, the multiple can expand quickly. If execution slips, sentiment will punish the stock just as quickly.
Catalysts (what could drive the breakout)
- Commercial bootcamp successes turning into multi-year deals - sustained account expansions will prove the flywheel and justify multiple expansion.
- New product integrations and high-visibility partnerships - example: the Surf Air announcement (12/30/2025) showing Palantir powering an AI platform for commercial launch in 2026 reinforces route-to-market and referenceability.
- Quarterly results that continue the pattern of accelerating revenue + margin expansion - the Q1->Q2->Q3 run is the template investors will watch for repeatability.
- Macro rotation into application-layer AI - broader reallocation from infrastructure into application AI names would lift multiples across peers.
Trade plan (actionable)
- Direction: Long (swing trade, tactical).
- Time horizon: Swing (2–10 weeks) with a willingness to hold into 1–3 months if catalysts line up.
- Position sizing: Small-to-moderate (5%–8% of a risk capital allocation) given elevated valuation and headline volatility.
- Entry: 170–186 (prefer layering: half size near 186 if showing momentum; add into 170–176 on pullback/support). Current trade prints around 184.17 (12/30/2025).
- Initial stop: 155 (tighten to 165 if you scale in higher). This is ~15% downside from the upper entry band and protects against broad sentiment reversals.
- Targets:
- Target 1: $230 — near-term momentum target (~25% above 184), reasonable if earnings/partnerships prompt multiple expansion.
- Target 2: $300 — stretch target if the bootcamp flywheel shows durable multi-account conversions and gross margin stays high.
- Target 3: $400 — parabolic scenario if Palantir becomes a clear application-layer AI winner and sentiment re-rates it into the top tier of AI multiples.
- Notes: Keep size disciplined. Trim into strength. Reassess at each quarterly print.
Risks and counterarguments
Palantir's story is compelling, but the trade carries material risks you must acknowledge. Below are the principal risks and a contrarian view to the core thesis.
- Extreme valuation risk - implied market capitalization (naive price * diluted shares) is very large relative to run-rate revenue. If growth disappoints, the multiple can compress violently.
- Execution dependence on bootcamps - the thesis assumes the bootcamp model consistently converts to long-term, high-margin contracts. If conversion rates fall or implementations take longer, margins and revenue growth will suffer.
- Concentration and government exposure - while government business is sticky, it can be lumpy and politically sensitive; changes in procurement or policy could impact revenue cadence.
- Macro / sentiment risk - Palantir trades like a momentum AI name. A broad rotation out of growth / AI or renewed rate fear could trigger a sharp decline regardless of fundamentals.
- Competitive threat - enterprise AI adoption invites competition from large cloud and software incumbents; pricing and go-to-market pressure could erode the company’s advantaged positioning.
Counterargument: The bullish read is highly dependent on continued expansion and scale economics; one or two quarters of slower-than-expected commercial landings or a major implementation failure could erase enthusiasm quickly and compress the stock materially. In that scenario the stock is trading on a forward narrative rather than on secured, multi-year contracted ARR.
What would change my mind
I would downgrade or close the trade under any of these conditions:
- Next quarter shows revenue deceleration (Q4 sequential contraction vs Q3) or materially lower-than-expected commercial deal conversions.
- Operating income and operating cash flow fail to scale with revenue (i.e., margins revert or implementation costs balloon).
- Clear evidence the bootcamp model is not repeatable — e.g., high churn in newly onboarded commercial customers or inability to convert pilot projects to multi-year contracts.
- Macroeconomic regime shift (sharp risk-off) that extinguishes appetite for long-duration growth; in that case I would either tighten stops or exit.
Final thoughts and stance
Palantir combines attractive attributes: accelerating revenue, improving margins and strong operating cash flow. The company is demonstrating the mechanics of a bootcamp-to-contract flywheel; if that pattern proves repeatable across a broader commercial base the upside is significant and could produce a parabolic move as investors bid for application-layer AI winners.
That said, this is a high-risk trade. Valuation is already aggressive on any naive metric, so execution and sentiment must both cooperate. For disciplined traders who can size appropriately and stick to the stop, this is a tactical long with a favorable risk/reward if you believe the bootcamp-powered expansion continues. I am long at the levels noted above, with strict stops and the discipline to trim into strength.
Filed Q3 2025 data source: Palantir Form filing (acceptance date 11/03/2025; filing date 11/04/2025). Latest market prints cited 12/30/2025.
Relevant links: Q3 2025 filing; news mention - Surf Air Palantir partnership (12/30/2025).