Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
Global Head of Investment Strategy
Every stock market era has its rocket ships—the companies investors hitch their hopes to, believing gravity no longer applies. Tesla had its day, Amazon famously soared before justifying its value, now it’s Palantir Technologies that finds itself in this rarefied air, propelled by the intoxicating promise of artificial intelligence.
Palantir’s shares have surged an eye-watering 567% over the past year, making it one of the most talked-about growth stocks out there. Yet even the most powerful rockets must eventually confront the laws of physics. With its latest blockbuster earnings report, investors must ask: can Palantir continue defying gravity, or will reality inevitably pull it back down?
Palantir crossed a critical threshold this quarter, posting its first-ever billion-dollar revenue, smashing analyst expectations. Revenues soared to USD 1.004 billion, a 48% leap year-over-year, significantly surpassing forecasts of USD 940 million.
CEO Alex Karp, known for his bold rhetoric, called the results "a once-in-a-generation event," driven by an "astonishing impact" of artificial intelligence. Not mincing words, he added with characteristic bravado, "We are sorry that our haters are disappointed—but there are many more quarters to disappoint them, and we're working on that too".
Once defined by its close relationship with the Pentagon, Palantir is increasingly turning commercial—particularly in the US, where business revenue surged 93% this quarter to USD 306 million. Major deals with blue-chip firms such as Citibank, Panasonic Energy, and GE Aerospace underscored a growing shift toward enterprise adoption of Palantir’s AI solutions.
Yet government contracts remain pivotal. The standout this quarter: a transformative USD 10 billion, ten-year contract with the US Army consolidating 75 separate agreements. This highlights Palantir's unmatched influence in defence modernisation and its secure foundation for future revenues.
“Palantir isn’t just a government vendor anymore—it’s becoming an indispensable partner for enterprises in the AI revolution.”
Unlike many high-growth tech firms burning cash to scale, Palantir delivered strong profitability, with adjusted operating margins of 46% and adjusted earnings per share of USD 0.16—above expectations of USD 0.14. The company's "Rule of 40" score, combining growth and profitability, soared to a stellar 94, significantly outperforming tech industry norms.
Here’s the catch: Palantir’s valuation is now stratospheric, currently trading at roughly 80 times projected next-year revenue and at a P/E level of staggering 239—far surpassing valuation peaks of historic high-flyers like Tesla, Alphabet, or Salesforce.
CEO Alex Karp argues Palantir can expand its US revenues tenfold in five years, implying revenues of around USD 13 billion domestically alone. But even under this ambitious scenario, today’s valuation remains extremely lofty. Investors are essentially betting Palantir will dominate an AI market that hasn't fully matured yet.
“At 80 times forward revenue, Palantir investors aren't merely optimistic—they’re betting on an unprecedented, near-perfect execution of an AI vision.”
Analysts remain cautious; fewer than a third currently have buy ratings, highlighting significant scepticism over the sustainability of current valuations.
Investors, particularly latecomers, must remain vigilant about these risks:
“Palantir’s trajectory is thrilling—but at these altitudes, even minor setbacks could trigger dramatic descents.”
Retail investors must balance their enthusiasm for Palantir’s AI-driven potential with clear-eyed realism about valuation risk. Here’s what to watch closely:
“Palantir is riding an extraordinary wave. Investors need steady nerves, disciplined expectations, and a readiness for volatility. Remember: even the strongest waves eventually crest.”
Palantir’s Q2 results undeniably demonstrate the immense transformative power of enterprise AI, underscoring why investors have propelled shares skyward. Yet, the rarefied valuation leaves virtually no margin for error.
While it’s tempting to believe this rocket can keep climbing indefinitely, history reminds us otherwise. Ultimately, investors must ask themselves: can Palantir deliver perfectly on the extraordinary promises now priced into the stock—or will reality eventually reassert itself?
Gravity may seem distant today, but investors would be wise not to forget its existence altogether.
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