Earnings season always makes me think twice about my portfolio. Even when I believe in a company, there is always that question before results come out: should I continue holding, reduce my position or sell before the announcement?
$Palantir(PLTR)$ is a good example of why this decision is not always straightforward.
Going into its latest earnings announcement, I was expecting a strong report. Palantir has been one of the most closely watched AI stocks, and its business has benefited from growing demand for AI software from both businesses and government customers.
I was particularly interested in whether its commercial business could continue growing at a rapid pace. Government contracts have been an important part of Palantir’s business for years, but the opportunity to expand into the private sector could become a much bigger growth driver.
The company certainly delivered some impressive numbers.
For Q3 2026, revenue reached $2.313 billion, up 96% year over year. That was above market expectations and marked another quarter of exceptionally strong growth. US commercial revenue increased 148%, while US government revenue grew 96%.
Another important milestone was that US commercial revenue surpassed US government revenue for the first time in the company’s history.
Palantir also reported adjusted earnings per share of $0.44, beating analysts’ expectations of $0.41. It raised its full-year revenue guidance to approximately $8.53 billion, suggesting management remained confident about demand.
On the surface, this looked like exactly the kind of earnings report shareholders would want to see.
But then came the market reaction.
Instead of rewarding the company, investors sent the share price lower. The stock initially fell around 6% in morning trading following the announcement.
As someone holding the shares, I would find that frustrating. The company had beaten earnings expectations, revenue was growing rapidly and management had raised its outlook. So what exactly was the market worried about?
After looking more closely, I think there are several things worth considering.
1. Strong growth is not always enough
Palantir is no longer being valued like an ordinary software company. Investors have already priced in substantial expectations for its future AI opportunity.
When a company has such a high valuation, the market expects more than simply beating analysts’ estimates. Investors want to see continued acceleration, stronger guidance and evidence that growth can be maintained.
A company can deliver excellent results and still disappoint shareholders if the market was expecting something even better.
That is the difficult part of owning a popular growth stock. The business can perform well, but the share price may still struggle because expectations are so high.
2. I would pay close attention to commercial growth
One of the most encouraging parts of the report was the 148% growth in US commercial revenue.
This matters because Palantir’s long-term opportunity is not limited to government and defence contracts. Its AI platform could potentially help companies across different industries improve operations, analyse information and automate complex processes.
If more businesses adopt its software and continue expanding their contracts, Palantir could build a much larger recurring revenue base.
However, I would not look at the headline growth rate alone. I would also want to understand how much new business is being signed, whether customers are increasing their spending and how quickly smaller initial projects turn into larger contracts.
There was one detail that deserves attention: US commercial contract value growth slowed to 11% year over year, compared with more than 153% in the previous quarter. This does not automatically mean demand is collapsing, but it does show why investors are looking beyond revenue growth.
I would want to see whether this slowdown is temporary or a sign that new contract momentum is becoming less consistent.
3. The guidance matters more than the headline earnings beat
Another reason I would not make a decision based only on the latest results is the outlook.
Palantir forecast fourth-quarter revenue of approximately $2.65 billion. That was above analysts’ expectations, and the company also raised its full-year outlook.
However, the market was looking at the pace of growth as well as the actual revenue figure. The fourth-quarter outlook implied slower sequential growth than the previous quarter.
For a company growing this quickly, even a small change in the growth trajectory can affect investor confidence.
This is particularly important when the share price already reflects high expectations for future performance.
4. Would I buy more after the decline?
My first reaction to a price drop would be to consider whether the market had overreacted.
But I would not automatically buy more just because the share price was lower.
A falling share price can create an opportunity, but it can also be a warning that investors are reassessing the company’s valuation or future growth prospects.
Before adding to my position, I would look at three things:
• Is revenue growth still strong, particularly in the commercial business?
• Are new customer contracts and customer spending supporting future growth?
• Is the current share price reasonable compared with the company’s expected earnings and cash flow?
I would also consider how much of my portfolio is already exposed to high-growth AI stocks. Even a company with strong long-term potential can become a risky holding if too much money is concentrated in one sector.
5. So, would I hold or sell?
At this stage, I would lean towards holding rather than selling purely because of the immediate post-earnings decline.
The business is still growing rapidly, profitability is strong, and the latest results show that demand for its products remains significant.
However, holding does not mean ignoring the risks.
I would be particularly careful about valuation. Palantir has a promising position in the AI market, but there is a difference between believing in the company’s future and paying any price for its shares.
If the business continues delivering strong growth, I would be comfortable giving the investment more time. If commercial growth starts slowing further or future guidance becomes less impressive, I would reconsider my position.
I would rather make a decision based on changes in the business than react emotionally to every red trading session.
My takeaway
Palantir’s latest earnings reminded me that a good company does not necessarily translate into a good short-term stock performance.
Sometimes the market is not questioning whether a company is growing. It is questioning whether that growth is enough to justify the price investors are paying.
For me, the decision is not simply whether Palantir is a good AI company. It is whether its future growth can continue to support its valuation.
I would rather hold a company with strong fundamentals through some volatility than sell simply because of one disappointing reaction. But I also do not want to confuse loyalty to a stock with a sound investment decision.
If I already own the shares, I need to be just as disciplined about reviewing my reasons for holding as I was when I first bought them.
What would you do with Palantir after these results? Would you hold through the pullback, take some profits before the next earnings report, or use the decline as an opportunity to add to your position?
For discussion purposes only. Not financial advice.
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