Few businesses have captured the AI moment this year quite like Palantir (PLTR).

Once dismissed as merely a niche government contractor, it has evolved into a true market juggernaut, with its software offerings at the center of data-driven defense, logistics, and corporate AI.

The stock’s incredible climb has effectively mirrored that shift, having surged nearly 157% year to date, while hitting a record $198.81 in late October.

A big part of the AI giant’s enviable stock market performance is its superb earnings scorecard. Investors have become mostly accustomed to Palantir beating market expectations while rewriting its own playbook each quarter. 

However, success breeds scrutiny, and with a sky-high valuation, the company faces a new kind of test. It’s less about what it builds next and more about how well it has protected what it’s already built.

And it’s why the AI giant’s next big challenge doesn’t come from its own rivals, but from within its own orbit.

Palantir Technologies is suing former engineers over alleged data misuse.

Image source: Dietsch/Getty Images

Former insiders test Palantir’s grip on its AI secrets

Palantir is reportedly taking two of its former engineers to court, which comes at an inopportune time, as the company is already defending its turf.

The AI giant filed a federal lawsuit in Manhattan, blaming former senior engineers Radha Jain and Joanna Cohen of stealing confidential data in helping develop a rival startup, Percepta AI. 

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Both individuals played a key role in developing Palantir’s core AI tools and, apparently, walked away with access to its “crown jewels,” including source code and sensitive customer data.

Palantir is accusing them of using those critical assets in developing a copycat platform that could directly compete with Palantir’s data analytics products. In addition, the lawsuit names 10 ex-Palantir employees, including Jain’s brother and Percepta CEO Hirsh Jain, who have joined the new venture. 

Palantir is imploring the court to effectively enforce non-compete and confidentiality agreements, which are expected to stay in place for at least a year after departure.

At the same time, another Palantir competitor in Govini has been attracting all the right attention.

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The relatively smaller but fast-growing defense analytics firm is led by former Palantir executive Tara Murphy Dougherty. It recently topped a whopping $100 million in annual recurring revenue, while landing a  $150 million investment from Bain Capital.

Govini’s incredibly potent AI-powered “Ark” platform helps the Pentagon efficiently streamline supply chains while tracking critical resources, making it a rising upstart to Palantir at the heart of its market segment.

Takeaways on Palantir’s challenges:

  • Palantir’s legal fight is heating up nicely: The AI giant is effectively suing its two former engineers for taking confidential data to launch rival startup Percepta AI, along with 10 other ex-employees.
  • Rising competition in defense AI: Former Palantir executive Tara Murphy Dougherty’s Govini just hit $100 million in annual recurring revenue while securing $150 million from Bain Capital.
  • Bigger picture: As Palantir defends its intellectual property, new competition is closing in on its once-clear lead in defense and government AI analytics.

Q3 setup: Palantir’s numbers keep growing, but so do expectations

Palantir is expected to report its Q3 earnings after the bell on Nov. 3, and Wall Street’s bar is rising swiftly. 

Market analysts expect the analytics giant to post a superb $0.17 in adjusted EPS, $0.11 GAAP EPS, and about $1.09 billion in sales, backed by 20 upward EPS revisions in the past three months with zero cuts.

As we usher in the new fiscal year, investors will zero in on the commercial momentum of Palantir’s Artificial Intelligence Platform (AIP), along with fresh U.S. government contracts and any signs of margin strength that justify its premium valuation.

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It’s imperative to note that the September quarter usually benefits from federal fiscal year-end spending, boosting government deal flow in the process. That makes the current print a strong litmus test of whether Palantir’s U.S. momentum can extend into 2026.

Q2 set a high bar, with Palantir delivering another blowout. 

Revenue came in at a superb $1.0 billion, up 48% year over year, along with an adjusted EPS of $0.16, which beat expectations. Growth in U.S. commercial business skyrocketed to a whopping 93%, while U.S. government revenue jumped 53%, which combined for a 68% total jump at home.

Company management also bumped its Q3 revenue outlook to $1.083-$1.087 billion while guiding for full-year sales to hit about $4.14 billion, implying robust 45% growth.

On top of that, the company expects GAAP profitability each quarter of 2025 and free cash flow of up to $2 billion.

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