### Palantir Stock Rises 23.5% on Strong Q3 Report Boosted by AI Demand

Palantir Technologies saw its stock skyrocket by 23.5% last Tuesday following the release of an exceptionally strong third-quarter report for 2024. The software-as-a-service (SaaS) company pleased investors by surpassing Wall Street's revenue and earnings expectations, issuing higher-than-anticipated fourth-quarter revenue guidance, and raising its full-year forecasts for several key metrics.

In the third quarter, Palantir reported a 30% year-over-year increase in revenue and a 43% surge in adjusted earnings per share (EPS), driven by what CEO Alex Karp termed "unrelenting" demand for artificial intelligence (AI). The company experienced robust performance across both its government and commercial segments, with revenues rising 33% and 27%, respectively.

Palantir's SaaS business model is a standout, generating recurring revenue through cloud-based software subscriptions. This predictability is a strong point for investors, as showcased by the company’s net-dollar retention rate, which climbed to 118% in Q3, up from 114% in the previous quarter. This metric indicates the increased spending by existing customers and suggests a thriving U.S. business.

Additionally, Palantir demonstrated a phenomenal free cash flow (FCF) margin, reaching just over 57% for the third quarter. When adjusted, this figure rose to 60%, placing the company in the league of high-performing peers such as Nvidia, Meta Platforms, Microsoft, and Broadcom.

One of Palantir's unique advantages is its limited to non-existent business in China. This strategic positioning helps insulate the company from potential fallout should the U.S. government impose further restrictions on AI-related exports to China.

Despite its elevated valuation, trading at 127 times projected 2025 earnings, Palantir is considered a worthwhile investment due to its significant earnings growth prospects and powerful free cash flows. For those looking to invest, a staggered purchasing approach, such as dollar-cost averaging, is recommended to mitigate risks associated with market volatility.