Nvidia (NVDA +2.09%) has experienced a renaissance over the past few years. The company's graphics processing units (GPUs) first revolutionized the gaming industry, but have more recently become the gold standard for data centers, laying the groundwork for the artificial intelligence (AI) boom. A blistering run in sales and profit growth helped catapult Nvidia's market cap to increase more than 13-fold to $5 trillion, marking the first company to surpass that milestone.
In recent months, however, there have been increasing concerns that the relative rates of AI adoption have begun to decelerate, even as absolute growth rates remain impressive. As a result, some investors are looking for indications that businesses continue to adopt these cutting-edge algorithms and that the AI revolution remains on track.
Palantir Technologies (PLTR +3.35%) just provided the clearest evidence yet that it's still early innings for AI.
Image source: Getty Images.
Blockbuster results
Investors had great expectations heading into Palantir's financial report, and the data mining and AI specialist delivered. For the third quarter, revenue of $1.18 billion accelerated 63% year over year and 18% quarter over quarter. This fueled adjusted earnings per share (EPS) of $0.21, which soared 110%.
For context, analysts' consensus estimates called for revenue of $1.09 billion and adjusted EPS of $0.17, so Palantir eclipsed expectations with room to spare.
The headliner was Palantir's U.S. commercial segment, which houses the company's flagship Artificial Intelligence Platform (AIP). Revenue accelerated for the ninth consecutive quarter, soaring 121% to $397 million, while climbing 29% sequentially. At the same time, the segment's customer roles surged 65%, as new users swarmed to AIP. This fueled the total contract value (TCV) that soared 342% to a record $1.3 billion.
Perhaps more impressive is Palantir's backlog of future business. The company's remaining performance obligation (RPO), or contractually obligated revenue that hasn't been booked as sales, surged 66% to $2.6 billion. This illustrates that the company is building a solid foundation for future growth.
NASDAQ: PLTR
Key Data Points
The state of AI
While this is all obviously good news for Palantir investors, the results have broader implications across the AI landscape and appear to confirm what investors learned last week.
At Nvidia's GPU Technology Conference (GTC) last week, CEO Jensen Huang stated that Nvidia's backlog for its Blackwell and next-generation Rubin chips had reached "half a trillion dollars so far." That number far exceeded any of Wall Street's most bullish estimates, which caught some investors off guard.
Recent pronouncements by the "Four Horsemen" of big tech help explain why. Amazon, Microsoft, Alphabet, and Meta Platforms plan to collectively spend $380 billion on capital expenditure (capex) this year alone, with the vast majority of that spending allocated to data centers to support growing demand for AI. Furthermore, each has gone on record as saying that spending will ramp even higher in 2026.
Stepping back, Palantir's results show that AI adoption is moving downstream. Put another way, the use of AI is no longer confined to the tech industry leaders but is becoming increasingly mainstream, as illustrated by Palantir's accelerating results. As more enterprise-level businesses join the AI boom, many will need to build out their infrastructure with AI-capable chips, which will also benefit Nvidia.
NASDAQ: NVDA
Key Data Points
Palantir's results and Nvidia's backlog seem to dispel the notion that AI adoption is slowing, which has become the popular narrative as of late. The evidence clearly shows that, quite the opposite, demand for AI is booming.
Nvidia leads the data center GPU market, with a dominant 92% share, according to IoT Analytics. And as AI expands beyond the data center, Nvidia is well positioned to profit from this migration, as its chips are the gold standard for both phases of AI -- namely, training and inference.
Since the AI boom kicked off in early 2023, Nvidia has gone parabolic, soaring 1,320% (as of this writing) and continues to regularly hit new highs. At 31 times next year's expected earnings, Nvidia certainly trades for a premium. That said, I would assert that it's a reasonable price to pay for a company that is expected to grow revenue by 27% annually over the next five years.
Nvidia has staked its claim as the picks-and-shovels play for the AI revolution, and despite the stock's blistering rally over the past several years, there's a growing body of evidence that suggests there's a long runway ahead.
