Alex Karp may be celebrating a breakout quarter, but that might not be enough to keep Wall Street convinced.
“Palantir is on fire,” Palantir’s chief executive said on May 5 during the earnings call. Many of the company’s latest numbers and guidance exceeded analysts’ estimates. However, the stock tumbled 12% the next trading day, nearing its biggest decline since May 7, 2024, when it fell over 15%.
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For the first quarter of 2025, Palantir reports adjusted earnings per share of 13 cents, in line with Wall Street’s expected 13 cents. Revenue surged 39% to $884 million, exceeding expectations of $863 million.
“We are in the middle of a tectonic shift in the adoption of our software,” Karp said. “We are delivering the operating system for the modern enterprise in the era of AI. Consequently, we are raising our full-year guidance for total revenue growth to 36% and our guidance for U.S. commercial revenue growth to 68%.”
Palantir’s first-quarter revenue beat was primarily fueled by robust U.S. sales, which rose 55% year-over-year. U.S. commercial revenue jumped 71%, while government revenue grew 45%. U.S. revenue accounted for about 71% of the total.
But first-quarter international commercial revenue growth has stalled, down 5% from a year ago, primarily due to “continued headwinds in Europe.”
Palantir projects second-quarter revenue of $934 million to $938 million, surpassing the consensus estimate of $899.1 million. The company also raised its full-year 2025 revenue forecast to $3.89 billion to $3.902 billion, topping the consensus of $3.75 billion.
Just a day before the earnings report, Palantir’s stock was trading near its all-time high and marked a year-to-date surge of 63%.
Palantir’s sky-high valuation is a problem
Palantir (PLTR) is known for providing AI-driven data analytics software to the U.S. government, military, and commercial clients worldwide, including JPMorgan Chase, Airbus, and Merck.
Its stock has gained eightfold over the past five years as investors rush to early adopters in the AI space. Last year, the stock gained a remarkable 340%.
Related: Veteran fund manager sounds alarm on Palantir’s stock
Just a day before the earnings report, Palantir’s stock was trading near its all-time high, marking a 63% year-to-date surge.
The stock’s elevated valuation has raised concerns about the sustainability of its performance.
Palantir currently trades at 232.56x forward earnings, well above other software providers like Microsoft (MSFT) , which is 29.07x, and Salesforce (CRM) , which is 24.51x.
Meanwhile, Gil Luria, head of technology research at D.A. Davidson, says the stock is being driven up by “very loyal” individual investors who prioritize the company’s mission over its valuation.
In February, the company posted 2024 fourth-quarter results that surpassed Wall Street expectations, with revenue growing 36% year-over-year. It also provided strong guidance for 2025. Palantir stock hit its all-time intraday high of 125.41 on Feb. 19.
Then, in March, the stock pulled back, driven by budget cuts at the Pentagon, its crucial client, and a broad market sell-off.
In April, the stock rallied, fueled by market corrections and recent defense contracts, including one with NATO.
Meanwhile, fund managers are already selling.
Cathie Wood, head of Ark Investment Management, has been trimming her Palantir stake since April 28. Over the past two weeks, her Ark funds sold 396,779 shares worth roughly $42 million.
Analysts raise Palantir stock price target after earnings
Several analysts have raised their stock price target for Palantir after earnings.
Wedbush analyst Daniel Ives raised the firm’s price target on Palantir to $140 from $120 and reiterated an outperform rating.
Related: Warren Buffett sends strong message on stock market drop
“The company continues to capitalize on the AI demand wave with its AIP product moat gaining further traction moving forward,” the analyst wrote, adding that Palantir is gaining traction in Europe with its recent NATO partnership.
Wedbush views Palantir as a generational tech name with “a trillion-market cap over the next three years” and a core name in the AI Revolution theme over the coming years.
Meanwhile, Mizuho raised its price target on Palantir to a modest $94 from $80 and keeps an underperform rating, thefly.com reported.
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The firm says it remains “impressed” by Palantir’s recent execution but cautions that “valuation cannot and should not be irrelevant.”
It adds that the stock’s “very high multiple” is “very difficult” to justify, as it already prices in significant growth acceleration and upside well beyond current expectations.
Palantir closed at $108.86 on May 6.
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