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Palantir shares slumped 5% on Tuesday after the software company reported third quarter earnings, with analysts focusing on signs that growth in total contract value was slowing. The decline followed a report that also contained major revenue milestones.

The company said revenue nearly doubled from a year earlier and surpassed $2 billion for the first time. Despite that expansion, analysts directed attention toward total contract value and other “forward indicators” that could shape investor expectations in subsequent quarters.

U.S. commercial revenue exceeded government revenue for the first time, marking a notable shift in Palantir’s reported business mix. Yet the total contract value generated by the U.S. commercial segment showed a much slower rate of growth than in the preceding quarter.

Palantir closed $1.5 billion in total contract value in the U.S. commercial segment during the third quarter. That represented an increase of 11% from the same period last year, according to the company’s reported figures.

The comparison with the second quarter was considerably stronger. During that period, Palantir closed a record $2.1 billion in total contract value within the U.S. commercial segment, an increase of 153% from the prior year.

The latest figure still represented annual growth, but the pace was far below the 153% increase reported in the second quarter. That contrast placed the company’s contract activity at the center of analyst commentary following the earnings release.

Piper Sandler addressed the concern in a Monday note, saying investors would want confirmation that the latest growth rate did not signal a lasting shift. The firm framed contract duration as a key issue to watch in coming quarters.

Investors will “no doubt be looking for evidence in subsequent quarters that 11% growth in U.S. commercial TCV bookings is a fluke of duration and not something structural,” the Piper Sandler note said.

The analysts nevertheless maintained an upbeat view of demand for Palantir’s products. “We believe that is the case and demand for PLTR’s solutions still very much outstrip supply,” the note said.

Goldman Sachs analysts also examined the reduced growth in total contract value in a Tuesday note. They said Palantir attributed some of the slowdown to contracts being signed for shorter periods.

“The key will be converting shorter duration contracts into longer duration commitments, which Palantir has done successfully in the past,” the Goldman Sachs analysts wrote.

That explanation places attention on whether customers extend their shorter commitments over time. For investors, subsequent results will provide evidence about whether contract duration explains the slower growth or whether the change persists across future reporting periods.

The third quarter therefore presented two sharply different signals from the software company. Revenue nearly doubled and crossed $2 billion for the first time, while U.S. commercial total contract value growth slowed markedly from the rate recorded one quarter earlier.

Palantir’s U.S. commercial business also achieved the milestone of surpassing government revenue for the first time. At the same time, its $1.5 billion in segment total contract value came in below the record $2.1 billion reported for the second quarter.

The share decline showed that the revenue milestone did not prevent investors from reacting to concerns raised by contract activity. Analysts concentrated on the durability of bookings, the length of customer commitments, and the company’s ability to convert shorter contracts into longer ones.

Piper Sandler’s view was that demand for Palantir’s solutions continued to exceed supply, while Goldman Sachs highlighted the importance of contract conversion. Those assessments left future quarters as the test of whether the 11% growth rate was temporary or structural.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.