Palantir: AI Exuberance Likely To Resume Before Year-End

Reiterated strong-buy on Palantir after recent pessimism tied to Michael Burry’s short, noting robust Q3 fundamentals with revenue of $1.181bn (+63% YoY), US revenue up 77% YoY and raised FY2025 revenue and free cash flow guidance; the author argues sentiment-driven underperformance could reverse later in the year. The note flags a rich valuation (~295x next-year earnings) and a material risk that international commercial revenue is barely growing (≈10% YoY in Q3), so near-term growth remains concentrated in the US.

Analysis

The author reiterates a strong-buy on Palantir after recent pessimism linked to Michael Burry’s short contributed to the stock’s underperformance, noting company fundamentals remain robust. Palantir reported Q3 revenue of $1.181 billion, up 63% year-over-year, with US revenue up 77% YoY and management raising FY2025 top-line and free cash flow guidance, signaling continued demand and improved cash conversion expectations.

Valuation is a material counterweight: the note cites a forward multiple of roughly 295x next-year earnings, implying the share price already prices in significant execution and AI-driven growth. Near-term growth concentration in the US and a slowing international commercial segment (about 10% YoY in Q3) create a two-track outlook where multiple expansion depends on either durable US outperformance or recovery in international revenue.

Investor-impactable items include execution on the raised FY2025 guidance, FCF delivery and any signs of international acceleration; the author also discloses a long in SOXL, which is a potential conflict to note. Given the mixed signal of strong operational momentum versus a stretched multiple and activist/short interest, timing and risk management will determine outcomes.

Key Decisions for Investors

• Consider adding exposure selectively only if you can accept a high forward multiple and US-centric growth, stagger purchases to mitigate sentiment-driven volatility
• Monitor FY2025 guidance execution, quarterly FCF conversion and any improvement in international commercial growth (>10% YoY) as concrete re-rating catalysts
• Limit position size or use hedges/options to protect against downside from continued short interest or sentiment-driven drawdowns, and reassess if valuation compresses or guidance slips