Palantir Just Had Its Best Quarter in a Year, Up 60%
Palantir just posted its strongest quarterly gain in over a year, but the valuation now demands flawless execution and leaves almost no cushion if growth stumbles even slightly. Here is how it stacks up against one of the most entrenched…
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Palantir Technologies (NASDAQ:PLTR | PLTR Price Prediction) rose 60.3% in the third quarter. That was its best three-month run since the second quarter of 2025. Even so, Palantir is up just 6.55% this year, because it lost most of that ground in the first half.
Palantir and Microsoft (NASDAQ:MSFT) rarely compete for the same contracts but sit at opposite ends of the enterprise software spectrum.
Palantir Wins on Growth Rate, Microsoft Wins on Dollars
The rally started with the August 3, 2026 earnings report. Revenue rose 93% to $1.935 billion, and U.S. commercial revenue jumped 149% to $764 million. The stock gained 29% the next day.
Microsoft’s quarterly revenue grew 17.75% to $90.01 billion. That added about $13.6 billion in new sales versus about $931 million for Palantir. High growth rates are easier from a small base; dollar figures show which business gets more enterprise AI spending.
| Lens | Palantir | Microsoft |
|---|---|---|
| Latest revenue growth | 93% | 17.75% |
| Forward P/E | About 100x | 25x |
| Operating margin | 47% | 45% |
Paying 100 Times Earnings Leaves Little Room for Error
At $189.40 a share, Palantir trades near 100 times forward earnings versus Microsoft’s 25 times. Palantir’s expected earnings would need to grow about four times larger to reach that multiple.
Full-year guidance of $8.15 billion points to years of growth near the current pace, realistic only if U.S. commercial demand holds. Stock-based compensation of $265 million last quarter dilutes shareholders.
The average analyst target of $195.57 just tops the share price. UBS and DA Davidson raised targets to $250 in September, while Michael Burry holds puts expiring in 2027 and ARK sold $3.95 million of stock on October 1, 2026.
Microsoft’s Moat Looks Harder to Dislodge
Palantir’s edge comes from forward-deployed engineers and deep ties to government, where U.S. government revenue rose 90%. That base exposes it to budget cycles and cancellable contracts; a change of administration could test both. Its Armada partnership puts Palantir software on modular data centers customers own, a different sales model than hosting.
Microsoft’s moat comes from identity, security, productivity and developer tools customers use daily. Azure grew 43%. Satya Nadella repeated Palantir’s pitch on customer control: “The models are an input, not some extraction of the knowledge of the enterprise.”
What Palantir Must Prove Before Its Next Earnings Report
Palantir’s business results are strong, but a forward multiple near 100 means even a small slowdown in growth would likely pressure the shares. At this price, Microsoft’s valuation leaves investors more margin for error than Palantir’s (riding a mania is fine as long as you plan the exit, and our free handbook covers both halves: here).
Microsoft’s free cash flow fell 23.19% to $19.64 billion when quarterly capital spending reached $35.8 billion. A $678 billion commercial backlog and more than 30 million paid Copilot seats show real demand behind that spending.
Palantir reports third-quarter results in early November against guidance of about $2.16 billion. The current share price already assumes Palantir will meet or beat that guidance.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
