Palantir Shares Slide as Investors React to High Expectations and Valuation Concerns

Palantir Technologies saw its stock fall sharply on Tuesday after reporting quarterly earnings that, while strong on paper, failed to meet the elevated expectations of Wall Street.

Despite beating revenue forecasts and raising its full-year guidance, the company’s shares dropped about 14% during regular trading, following a 7% decline in premarket activity.

The Denver-based data analytics and artificial intelligence firm reported a 39% year-over-year revenue increase to $883.9 million in the first quarter, slightly ahead of analyst estimates of $862.8 million. Adjusted earnings came in at 13 cents per share, matching consensus expectations. Net income rose to $214 million from $105.5 million a year earlier.

Palantir also raised its 2025 revenue forecast to a range of $3.89 billion to $3.90 billion, up from a prior range of $3.74 billion to $3.76 billion. Yet this upward revision appeared insufficient to sustain investor enthusiasm, especially following a 63% rally in the stock this year and a more than fourfold surge in 2024, driven by optimism around AI and government contract momentum.

“We believe we have reached a point where respectable earnings beats and raised guidance aren’t enough to materially move the stock to the upside,” wrote Morningstar analyst Mark Giarelli.

Analysts attributed the stock’s post-earnings drop to a mix of factors: a sequential margin decline, softer international commercial revenue — which fell 5% year over year — and lingering questions about the sustainability of Palantir’s premium valuation. The company’s forward price-to-earnings ratio stands at over 200, significantly higher than peers like Snowflake, Salesforce, and Datadog.

Despite robust US government business and AI-driven demand across healthcare, energy, and automotive sectors, some analysts expressed concern that Palantir’s growth rate may not keep pace with its valuation. “Very difficult to justify” is how Mizuho’s Gregg Moskowitz described the company’s multiple, while RBC Capital’s Rishi Jaluria questioned whether forward guidance was conservative or already priced in.

CEO Alex Karp remained upbeat during the earnings call, stating that “Palantir is on fire,” and crediting long-term investments and a cultural shift in US industry for the company’s performance. Still, even bullish analysts acknowledge that the firm may need to consolidate gains before attempting further upside.

With input from Reuters and CNBC.