Palantir Stock faced a steep decline despite the company reporting strong first-quarter results for 2025, but the market reacted with skepticism, sending its stock down 12% the following day. Despite revenue of $884 million—beating Wall Street’s estimate of $863 million—and adjusted earnings per share of 13 cents, in line with expectations, investors appeared rattled. The drop marked one of the stock’s steepest declines since May 2024.
CEO Alex Karp expressed optimism during the earnings call, calling the performance a result of a “tectonic shift” in software adoption, driven by artificial intelligence. He emphasized Palantir’s role as a key player in this transformation, stating that the company is delivering “the operating system for the modern enterprise in the era of AI.” Karp also raised Palantir’s full-year revenue growth forecast to 36%, and U.S. commercial revenue growth to an impressive 68%.
Surging U.S. Revenue Offsets Global Weakness
Palantir stock continues to show strength as the company’s growth in the U.S. remains a dominant force, with U.S. revenue accounting for 71% of the total. Year-over-year, U.S. sales jumped 55%, while commercial revenue surged 71%, and government contracts rose 45%. However, international growth lagged, with overseas commercial revenue dipping 5% due to persistent challenges in Europe.
Looking ahead, the company expects second-quarter revenue to land between $934 million and $938 million, ahead of consensus estimates of $899.1 million. For the full year, Palantir raised its revenue forecast to a range of $3.89 billion to $3.902 billion, exceeding earlier market expectations of $3.75 billion.
Still, analysts and investors are cautious due to Palantir’s lofty valuation. Trading at over 232 times forward earnings, the stock significantly outpaces industry giants like Microsoft (29x) and Salesforce (24.5x). This valuation premium has sparked concerns about sustainability, especially as broader market volatility and budget reductions from key clients—like the U.S. Department of Defense—create uncertainty
Analysts Adjust Targets Amid Investor Divergence
Despite the post-earnings dip, several analysts remain bullish on Palantir stock and its long-term prospects. Wedbush analyst Daniel Ives raised his price target from $120 to $140, maintaining an “outperform” rating. He cited the strength of Palantir’s AIP (Artificial Intelligence Platform) and its growing presence in Europe, particularly through defense partnerships like NATO.
Ives went so far as to call Palantir a “generational tech name,” forecasting the potential for a trillion-dollar market cap within three years. Conversely, Mizuho struck a more cautious tone, increasing its price target modestly from $80 to $94 but retaining an “underperform” rating. The firm warned that the company’s current valuation is hard to justify, already reflecting aggressive growth expectations that may not materialize.
Adding to investor unease, prominent fund manager Cathie Wood has begun trimming her Palantir holdings. Since April 28, her Ark Invest funds have offloaded nearly 397,000 shares, worth approximately $42 million.
Palantir stock closed at $108.86 on May 6, as investors weigh strong financials and growth potential against high valuation risks and market volatility.
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