Palantir's Earnings Are Coming. The Market Sees a Rocket Ship. The Data Suggests Turbulence.
The digital bell is about to ring on Palantir’s third quarter, and the atmosphere is thick with the kind of tension usually reserved for a product launch or a Fed decision. On November 3rd, after the market closes, we’ll get the numbers. Until then, you can almost hear the collective holding of breath across trading desks and retail investor forums. Palantir (PLTR) isn't just a software company anymore; it’s a narrative stock, a proxy for bets on the future of AI, defense, and data supremacy.
And what a narrative it’s been. The stock has climbed nearly 150% year-to-date, a blistering run fueled by a potent cocktail of AI euphoria and a steady drip of nine-figure government contracts. The consensus expectations for this upcoming report reflect that optimism. Wall Street is looking for earnings per share of $0.17, a 70% jump from last year. Revenue is pegged at $1.09 billion, a year-over-year increase of about 50%—to be more exact, 50.7%.
On the surface, this is the story of a company firing on all cylinders. But when a stock’s valuation gets this far ahead of its fundamentals, my job is to look for the cracks. And I think I’ve found one. It’s not in the headline numbers everyone is quoting, but in the subtle, recent shifts happening just beneath the surface.
The Anatomy of Euphoria
You can’t blame the market for its enthusiasm. The bull case for Palantir is straightforward and compelling. The company’s AI Platform is clearly gaining traction, moving beyond its shadowy government-contractor roots and into the commercial sector. Its strategic partnership with Nvidia, announced just yesterday, is the kind of move that sends a clear signal, one that shows how Palantir Targets Greater AI Supremacy - With Nvidia's Help (NASDAQ:PLTR). This isn't just a software play; it's a foundational infrastructure play.
This is the engine that has propelled the stock to its current heights, leading analysts like those at Piper Sandler to slap a $201 price target on it. That optimism is backstopped by a formidable book of business. The company is sitting on a massive backlog (reported at $7 billion in active contracts and approximately $4 billion in less-certain IDIQ agreements), with recent wins like a new defense contract with Poland demonstrating continued strength in its core government vertical.
It’s easy to get swept up in this. The numbers are big, the partners are prestigious, and the technology is undeniably powerful. The narrative writes itself: Palantir is building the operating system for the modern enterprise and the modern military. But narratives don’t determine quarterly earnings beats. Analyst estimates do. And that’s where the story gets complicated.
A Quiet Contradiction in the Data
While the year-long trend has been overwhelmingly positive, a more granular, near-term dataset is flashing a quiet warning. I’m looking at the Zacks Earnings ESP, or Expected Surprise Prediction, a metric that has led some to ask, Palantir Technologies Inc. (PLTR) Earnings Expected to Grow: Should You Buy? It’s a proprietary model, but its logic is sound. It compares the broad consensus EPS estimate ($0.17) with the "Most Accurate Estimate," which is an aggregate of estimates that have been revised more recently. The theory is that analysts who update their models right before an earnings release have the latest, most relevant information.
For Palantir, the Earnings ESP is currently -5.88%.
Let that sink in. This figure suggests that the most recent analyst revisions are trending below the widely published consensus. While the crowd is looking at the sky, the analysts closest to the numbers are quietly, perhaps cautiously, trimming their expectations. I've looked at hundreds of these pre-earnings reports, and this kind of divergence between powerful stock momentum and negative near-term estimate revisions is a classic signal of potential volatility.
Think of it like this: the stock price is a high-performance engine, with the market redlining the tachometer based on the promise of future speed—the Nvidia partnership, the AI revolution. But the ESP number is the oil pressure gauge, and it’s starting to flicker. It doesn't mean the engine is going to blow, but it’s a clear indication that the internal mechanics might not be perfectly calibrated for the velocity the market is demanding.
This leads to the critical questions that the headline figures don't answer. If the long-term story is so robust, what are analysts seeing in the channel checks or their models that would prompt them to turn more bearish right before the print? Is it a slowdown in the commercial sales cycle? Or perhaps it’s the planned increase in hiring and expenses, which could be putting a squeeze on margins even as the top line grows.
The company has a history of beating estimates, clearing the consensus bar in three of the last four quarters. But does that track record create a dangerous precedent? It pushes the company into a corner where simply meeting lofty expectations isn’t enough. To justify a 150% YTD gain, they need a blowout quarter, followed by blowout guidance. Anything less could be interpreted as a failure, and the disconnect between the consensus price target of $157.65 and Piper Sandler's bullish $201 call shows just how wide the range of potential outcomes really is. The valuation leaves no room for error.
The Signal is in the Revisions
Let’s be clear: this doesn't mean Palantir's long-term thesis is broken. The partnership with Nvidia is real, the government contracts are locked in, and the demand for powerful AI platforms isn't going away. But the market has priced in not just success, but perfection. The stock's current valuation isn't a reflection of its performance last quarter; it's a bet on its performance for the next ten quarters.
The negative Earnings ESP is the most objective piece of data we have suggesting that near-term reality may not align with that perfect vision. The euphoria has created an asymmetric risk profile heading into November 3rd. A significant beat is already expected and largely priced in. A miss, or even an in-line report with cautious guidance, could trigger a substantial correction. The market is playing checkers, focused on the headline growth numbers. The smart money is playing chess, watching the revision trends. And right now, those trends are telling us to brace for turbulence.