The Rundown - Palantir Analyst Breaks Down “Grand Slam” Earnings, Explosive Commercial AI Growth

Episode Date: November 9, 2025

Palantir reported its best ever earnings in Q3 according to CEO Alex Karp, but will the AI defense giant be able to keep growing at record levels?Tyler Radke, Co Head US Software Research at Citi, provides insight into Palantir's recent earnings report and explains how the company could weather potential challenges, including an AI spending slowdown and international expansion hurdles.

Welcome back to the rundown, one of the top business podcasts in the world. Today, we are talking about Palantir with Tyler Radke. Tyler Radke is a senior equity analyst at City where he covers Palantir. So in today's episode, we're going to discuss Palantir's recent earnings report, why the stock dropped following the earnings, why enterprises are embracing Palantir's technology, who Palantir's biggest competitors are, and what it's like covering a company that has a mysterious brand and a cult retail following. Had a really great conversation with Tyler.

I think you guys will really enjoy it. All right. Let's go. All right, guys, we got Tyler Radke on the show today, senior equity analysts at City. Tyler, thanks for coming on. Yeah, I appreciate you having me. Of course, of course. We want to talk a little palanteer today.

They reported earnings this week. And CEO Alex Carp, he came out swinging after the earnings. He said that these are arguably the best. results any software company has ever delivered. So you sent the bar pretty high. I don't know, I don't know if you agree or not as someone who covers the stock. What was your takeaway from the Palantir report and Alex Carp's comments? Yeah, as he said, this really confounded the chattering class, which I thought that was a pretty epic line from the shareholder letter. So thank you for having the chattering class on to talk about it. But look, I mean, he may exaggerate a lot,

but I actually don't think he's too far off in terms of, you know, describing the fundamentals of this quarter. I mean, they report a lot of metrics. I think we could go through, you know, a number of them. But I think big picture, you're not seeing really too many software companies accelerate growth rates. And sure, you might have a couple points here of growth picking up. But the magnitude in which they're accelerating growth at the scale and while delivering, the profitability they're doing is pretty astounding. So this was, you know, this, you know, I think this was a grand slam, if you will,

of a quarter. Really not a whole lot to pick at in the quarter as we went through the metrics, you know, in terms of the revenue beat, the profitability beat, the guide ahead. The bookings, just the momentum that they're seeing on the U.S. commercial side is, you know, is pretty astounding. Net new ARR, net new ACV, if you look at the remaining deal value disclosure grew well over 200%, which is just enormous numbers. So you ask a question like why is the stock down, right?

And I think the answer is just valuation, right? I mean, this thing is going to do $4.5 billion of revenue this year, and it's at a $450 billion market cap, which is where Microsoft was, you know, a... a few years after Sachin Adela took over. Obviously, Microsoft, much, much larger revenue scale. So, you know, the bar is really high. We love what they're doing. It's just hard for us to see, like, the relative upside on the stock from here

compared to some other things out there. Yeah, I noticed you guys have a neutral rating on the stock and a $210 price target. And I always wonder, like, as an analyst covering Palantir, like, are you just wasting your time, like, building all these complex valuation, and whatnot because it feels like the stock sometimes just trades off of vibes and not really fundamentals and whatever Dr. Carp says in his interviews. Yeah. Yeah. Well, and I think it's interesting because I would argue if there was a quarter for the stock just to trade off vibes, like this would be the one and I think those vibes were pretty good. So as you pointed out,

210 is actually a decent amount of upside for the stock. So I'd say we're, you know, turning potentially more constructive on it. Certainly if this continues to pull back and the business accelerates, then that gets a little bit more interesting. I think broadly, right, I mean, you've seen some concerns just around the broader valuations of the market. A lot of the AI leaders have pulled back, Palantir being one of them. Certainly, you've had a lot of commentary from the open AIs and some of the, even frankly, some government leadership around the world just talking about valuation out there.

So I think it's being impacted by that. The headlines about Michael Burr. and the put positions, I think, might be stoking some concerns as well. Do you think if the tide turns on AI, if we finally got a full shift in the sentiment turns, is Pallantir one of the more vulnerable companies? Or do you think the strong growth that they're putting up will help them kind of buffer some of that pain? Yeah, it's a great question.

And the answer is like a little bit more nuanced than maybe people would like. I think on one hand, if you think about what are the risk around AI, like from a fundamental perspective, what people are worried about, people are worried about companies levering up their, you know, previously pristine balance sheets, overbuilding capacity for these data centers, and whether it's some deep seek moment or if you see open AI slow down, they're sort of worried about sort of a 1990s, you know, style bubble, right? More so on the infrastructure side. Now, I think for Palantir, what makes it more nuanced is on one hand, they're not indexed to KAPEX. They're not indexed to GPUs.

So what do they do? They do software that sits kind of on top of those GPUs. They provide sort of this data ontology layer. So that is not exposed to the same, you know, fundamental debt concerns, the overcapacity concerns, but the stock is very much grouped into the AI basket. And clearly the valuation has a lot projected in in terms of forward growth. So I do think it, would be vulnerable to that. But I don't necessarily think their numbers would necessarily fall apart in the same way that some of these other names would in a very downside scenario. And to be clear, like our view, we're very bullish on AI. I mean, we think the AI infrastructure CAP-X is going to continue to increase in orders of magnitude. This is a multi-trillion dollar market. So we're still

at the early innings. Sure, there could be some bumps on the road. But You know, we are constructive broadly on the theme. I want to talk about some of the specific numbers at Palantir. The government side of the business, I think, is still the majority, makes the majority of Palantir's revenue. But the real growth story seems to be AIP and the commercial adoption, commercial sales were up to 121% last quarter. Can you just, to our listeners who might not be super familiar with Palantir's commercial side of the business or the business in general, Can you explain what AIP actually is?

I see that word being thrown around a lot in finance media. What is AIP? Who's using it? What kind of corporations are using it? And why is it getting so much traction in the enterprise space? Yeah. And I would sort of argue AIP is not, don't think of it as much of a product is more of sort of a strategy for their core product. I think what Pallantier has done historically.

And this was pre-AI. You could even go back. know, 15 years, they were kind of preaching the same thing around having sort of this data ontology layer. What does that mean? It basically means, you know, if you, if you were to look at a Fortune 500 company, right, the data is extremely messy under the hood, right? You may have hundreds of thousands of databases, tens of thousands of applications, all on different code bases, right and basically what Palantir allows you to do is connect your business logic your business workflow to that data to have some very sophisticated ways of doing the data modeling some super talented engineers that they'll send to customers to kind of work with them at they call this forward deployed engineer route now why does that matter for AI well one of the big themes that we hear around AI is is AI readiness sort of getting your data ready for AI so being able to kind of unlock that data to be able to leverage the data, you know, to feed into the models, to do things like RAG or be able to kind of build a very specific model for whatever industry you're in.

Palantir is helping them do that. Now, they, through their credit, they certainly have introduced a lot of AI capabilities into the product. But in many ways, it's it is foundry, which is sort of their commercial product that they're selling in a lot of cases to these big companies. So a big company will call a Pallentere, be like, hey, we have all this data, help us, like, come up with some sort of business insight from all this disconnected data from all these different departments. And so the Pallantir people come in, they start hooking up all these data sources to their proprietary software, which is called Foundry, I believe. And then that provides insight to leadership, whether that's increase in efficiencies or something that they didn't even know about. And that's the value that Pallentier is providing to these companies. And maybe to give you a more tangible example, and I think what's been interesting to us to see, certainly over the last few years, is just how they're selling to these big companies. Oftentimes, this is, you know, data, right, a few years ago sort of used to be this mid-level thing, right?

You had a data engineer, like, very removed from the CEO, CFO of a company. What you're seeing now is talent in many cases they're working with heads of divisions, CEOs, CFO-level. sometimes at these Fortune 500 companies. And it's largely around something very strategic. So as an example, say you're a big bank, you have a wealth group, right? And you have hundreds of thousands of clients all around the globe, but you might have, you know, client information in 20 different systems. Like your trades maybe in one data, I have like seven different addresses for this customer.

Like how do you build a system? so that account rep or that wealth representative can kind of holistically view that data and, you know, be able to kind of take actions and, you know, add some predictions to basically be able to upsell that customer. And I think what's interesting is the way they come in and price is very much on a value-based outcome. So if you go to their website, you won't see pricing. It's not like they charge per user per month. It's not like they charge based on the number of data. They'll come in and basically say, look, hey, we think what we just did for you is going to unlock $100 million of savings or $100 million of new revenue, and we're going to take a 10% cut of it and kind of

take it or leave it. And, you know, it's, it's been pretty effective. That's a pretty good business model. Who do you think is like their biggest competitor right now? Do you see maybe like, like, maybe like a Microsoft, which is so plugged into all these enterprises? Can they come in and offer a similar type of product that has access to all these data sources with their co-pilot's kind of a punchline right now, but can co-pilot get there? Can co-pilot be a competitor?

Is a snowflake? Who do you see as a potential competitor? Yeah, it's a great question. And I think the reality is they don't have a lot of competition right now. As evidenced, they're the only one accelerating growth. Now, they are sort of an interesting model because it is a hybrid. like I talked about this forward deployed engineer approach. So it's not just, hey, we give you some out-of-the-box software,

customer downloads it, you're up and running. So there is a services component, but frankly, you're seeing a lot of these software businesses now in the era of AI, because AI, at least in enterprise software, has been a little bit slow to take off, actually lean into Palantir's forward deployed engineer approach. So I think that tells you there is going to be more competition coming. I would say today, Databricks, Snowflake, are probably the closest competitors.

It was actually interesting earlier this year. You did see Databricks win a pretty large DOD contract, I think, for the first time. And so, you know, you could be seeing some signs there. Again, big market. But I think when you do have these situations of a company that sort of has no competition, and if that were to change, right, that is something to, I think, you need to think about, especially at this valuation. Yeah, the valuation, it just seems like they're going to run away with the whole thing.

But that's why I was curious to hear what the potential competitors are. I want to pivot a little bit and talk about Palantir's U.S. versus international business. The U.S. continues to be the engine for growth, both government and enterprise. I think Alex Karp even admitted that international growth has been held down by stagnant Europe. International commercial only grew by 10 percent. quarter or so. Why do you think Palantir hasn't had the same level of success in Europe and other markets? And do you think that they'll potentially be able to tap those markets? Yeah. So it's interesting because if you go back to the time they went public back in 2020

and we've been covering it since then. And you looked at the split of the commercial business. Europe and international commercial was actually much larger than the U.S. I want to say it might have even been two to three X larger. And part of the reason was the, again, this company's been around for a very long time. They have some very large customers over there. So Airbus, one of their biggest customers, you know, multi-hundred million dollar deal. They have this program called SkyTRAX, which basically tracks all the components from engine parts to landing gear that are on their planes globally. It helps them do everything from predictive maintenance, supply chain management. That has been a,

an application that's been run on Palantier. Now, I think what's changed is they have really started to see clearly a lot of success in the U.S., as we talked about, over, you know, over 100% growth. But, you know, I think there's a couple reasons it's not going as well in Europe. I mean, I think in general, we see this with things like public cloud and in other major technology trends. Europe as a continent just tends to be a little bit more conservative, slower to adopt. various technologies. There's more red tape, more regulation. I think Alex Karp might have a little more colorful words about his European counterparts in terms of their motivations. But I mean, we generally observe that. And then, you know, clearly, look, this is a business that 50% exposure with the

government. A lot, most of that is the U.S. government. So I think for an enterprise that is not based in the U.S., like, that is something you consider. The same reason the U.S. doesn't do a lot of business with, like, a Huawei or something, you know, from China. So, you know, I, now this quarter, the international business actually picked up a little bit. I don't think that's coming from Europe. They've actually been having some pretty good success in the Middle East. Obviously, Israel's been a good region for them. But even Saudi, UAE, Qatar. I mean, these are, these are areas just as sort of the Western relationships are warming up. They are investing in. And, you know, I think there's a lot of money to spend over there. So that'll be interesting to watch. So that's on the government side, right?

Yeah. That's on the international government side, right? So it gets a little interesting because you, a lot of these things are sort of sovereign projects. Like, like for instance, the Saudi, you know, humane AI project. Is that government or is that commercial? Well, it's, it's a little bit of both, right? But yeah, it's it's both to answer your question. Okay, gotcha, gotcha. And that kind of brings me to like the concerns around like the public image of Palantir. You know, they're kind of mysterious. They have a very eccentric CEO. They're working with governments and international governments.

Do you think that matters at all or will it matter at all or maybe not because, you know, they're not a consumer product like a like a Tesla? Well, I think it, it matters in the sense of like you just mentioned. The international growth is a bit slower, right? I also think it matters from the standpoint. that, you know, there are certain countries, they're just, frankly, not going to do business with, right? Country, and they've been very clear about that, right? They are very aligned with the values of the West and, you know, democracy, you know, free speech type things.

Now, I think the good news is if you look at kind of the software tam, there tends to be the bulk of the revenue tends to be in those countries that they are, you know, more favorably aligned with. But those will be some natural inhibitors. And again, I think for like foreign, you know, large enterprise companies, that that might be, that might give people second thoughts just given, you know, the perception and concern being, hey, is this just U.S. spyware, right? Yeah. Yeah, that makes sense. Do you think, like, the fact that they're like a, they have such a cult following, does that impact your analysis at all? When you're like doing your analysis, you're like, man, there's like a billion YouTube videos about Palantir every. day. I remember watching these videos when the stock was at a $7 price three, four years ago.

There's just so much retail interests, just a cult following. How do you take that into account or do you at all or is that just noise to you? Well, I think, I think it's, it's been very interesting to watch. And so clearly the retail investors have, have experienced like Carputed VC backed returns on this. So, you know, it's, it's been, it's been great for them. And I think, I think, you know, it's a very interesting case study along with some of these other retail names. I think what it tells you, it adds different trading dynamics to the stock, right? And as we look at the ownership data, still about half of it is retail owned. And I would argue maybe those numbers are reported a little bit low because if you look at the institutional ownership of it,

you actually do have many funds that are sort of passive investing. And again, if you're buying S&P 500, right, you're sort of owning Palantir now, too. So, yeah, I think it definitely makes evaluating it more tricky, you know, especially the extent that you have a very loyal, you know, audience that maybe doesn't think about valuation or, you know, business trends in the same way as institutional investors. And so, yeah, it definitely makes it for an interesting stock to follow. Yeah, I just think about like what would happen in an actual true down cycle. How loyal will the retail audience be? It's probably going to make for some wild swings if and when we get to that point. Yeah, well, you saw a little bit of it in in 2022, right?

I mean, this thing collapsed all the way down to $7 or $8. And, you know, we had a sell on it from 30 all the way down to eight. And fortunately, took the sell off when things started to get. little bit better in hindsight that should have gone all the way up to the buy but you know I think when you when you do have these down cycles in you know retail owned stocks like you sometimes can get this compounding effect where people have stop losses and you know that triggers it which then forces more selling rate but you know on conversely right I think as a thing continues to work you people continue to bid it up as long as the momentum

there. So it kind of works in both ways. Last question for me. What would it take for you guys to give Palantir a buy rating? You currently have a neutral rating. What do you have to see to bump it up to a buy? Yeah, I think for us, it's a matter of valuation. And obviously with the volatility in the stock, we need something like over 25% upside in the stock. And, you know, Again, like it could be, like if this gets down to say $140, $150, that that would make the valuation side of this more interesting. Now, again, valuation is only one thing of it. And I think one of the my 10 rules of investing is like never change of you just on valuation alone. And so, again, if we had confidence that they were going to deliver the magnitude of revisions that they have this year, right?

I mean, this business entered the year growing like 20 percent. Now it's growing 60 percent, right? So unbelievable uptick in revisions. If we had confidence that that could continue, certainly this would be a buy. But you are, I mean, they are going to be running into some very challenging compares to be able to do that. So, you know, we'll see. I think, you know, as we kind of do our work, interquarter, talk to customers and get a sense for the deal pipeline. those are all things we'll think about.

Yeah, I think a lot of people are very curious about that. Tyler, I appreciate you hopping on, man, talking Palantir, one of the most interesting companies in the world. And I imagine, you know, it makes it pretty fun for your job as well, just tracking it. So I appreciate you hopping on and talking about the company. Yeah, thanks. Thanks for having me. Well, all right, guys, hope you enjoyed that conversation with Tyler Ratke.

You know, my biggest takeaway after talking to Tyler was hearing about Palantir's potential competitors. It looks like there's no one in the market. right now really challenging them. And I really wonder if that's going to change anytime soon. Let me know in the comments on Spotify and YouTube on what you guys thought about today's interview and who you want us to interview in future episodes. And if this is your first time listening, just in FYI, we post episodes every single day on YouTube and Spotify throughout the week explaining everything happening in the markets. So make sure you guys are

subscribed to the podcast and tuning in every day to stay in the loop. Thank you guys so much for listening, watching and commenting. Shout out to Mike and Conner. for all the work behind the scenes. And we'll see you guys back here on Monday. Rosen lasagna, medium power, 15 minutes. Sounds like Ojo time. Let's play.

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