Palantir (PLTR) CEO Alex Karp didn’t hold back during the company’s third-quarter earnings call. “These are arguably the best results that any software company has ever delivered,” he declared. “And it’s not so hyperbolic.”
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The numbers were undeniably strong. Palantir’s revenue grew 63% while free cash flow margins hit 42%, giving it a Rule of 40 score, which is a key software benchmark that adds revenue growth and profit margin, of 105. This figure narrowly beat its score from the previous quarter, showing continued operational improvement.
Still, “best ever” is a big claim, and the data shows Palantir’s quarter wasn’t even the strongest of the week.
How Palantir Stacks Up
Venture capital investors often use the Rule of 40 as a shorthand for software quality: a score above 40% suggests a company is both growing fast and generating healthy cash flow. Palantir’s 105 is excellent by that measure, but history has seen far higher numbers.
Zoom Video Communications (ZM) hit an average score of 413 during the pandemic boom in 2020 and 2021, when usage exploded worldwide. Atlassian (TEAM) logged a 108 in early 2021, while Shopify’s (SHOP) 2020 lockdown quarter delivered a 125.
Even in the current earnings cycle, digital ad platform AppLovin (APP) beat Palantir’s showing with 68% revenue growth and a 75% free cash flow margin, for a total Rule of 40 score of 143. Its CEO, Adam Foroughi, summed it up modestly as “another very good quarter.”
Microsoft’s Legacy Sets the Benchmark
Palantir also trails some classic benchmarks. Back in 1995, Microsoft’s (MSFT) quarter following the launch of Windows 95 saw 48% sales growth and 60% free cash flow margins, an extraordinary result for an already mature company. This performance helped set the tone for decades of consistent outperformance. Since then, Microsoft’s annualized return has averaged more than 18%, almost twice the S&P 500’s (SPX) 10.4%.
Palantir Builds on the Hype with Real, Tangible Growth
Hyperbole aside, Karp’s confidence isn’t without merit. Palantir’s government business remains a steady foundation, while U.S. commercial revenue, driven by demand for AI-powered enterprise tools, now accounts for 34% of total revenue, up from 25% a year ago.
The company’s ability to grow in both markets gives it momentum that many peers lack. Palantir may not have delivered the “best results ever,” but it’s clearly in one of its strongest growth phases to date.
Whether that strength continues will depend on how effectively it converts hype into sustained profitability and if it can deliver another quarter worth bragging about.
Is Palantir a Good Stock to Buy Now?
TipRanks data shows Palantir Technologies (PLTR) carries a “Hold” consensus rating from 16 Wall Street analysts over the past three months. The breakdown includes three Buys, 11 Holds, and two Sells.
The average 12-month PLTR price target stands at $187.87, implying a modest 5.6% upside from the latest close.
