Palantir Stock Slides Despite Strong Earnings. That’s the Price of a Sky-High Valuation.

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Palantir Stock Slides Despite Strong Earnings. That’s the Price of a Sky-High Valuation.

Palantir just posted a strong quarter. But when your stock is up 64% this year and you’re the most richly valued company in the S&P 500, strong doesn’t always cut it.

Revenue clocked in at $884M for Q1, up 39% YoY and ahead of estimates. The company also raised full-year guidance to ~$3.9B, citing booming demand for its AI software across both government and commercial clients. U.S. commercial sales surged 71% and government revenue jumped 45%. But despite all the glowing metrics, shares dropped ~9% after hours.

Wall Street Wanted a Firestorm, Not a Whirlwind

CEO Alex Karp described the current demand for Palantir’s AI tools as a “ravenous whirlwind,” and said the company’s growth “at this scale... is unparalleled.” That kind of language might have landed better if the stock wasn’t already priced like it’s inventing AI 2.0. At over 200x earnings, even solid beats feel underwhelming.

What Wall Street really saw: a quarter that met expectations, not one that shattered them. Adjusted EPS came in at $0.13—right in line—and while sales exceeded forecasts, the high bar for AI-driven growth meant any sign of moderation would trigger a pullback.

Riding the AI Wave—But for How Long?

Palantir’s bread and butter remains defense and intelligence work, but it’s rapidly expanding into the corporate world. The company signed 139 deals worth $1M+, including 31 topping $10M. It also expects to generate over $1.7B in adjusted operating income this year, along with $1.6–$1.8B in free cash flow.

Still, cracks are showing. With the stock having quadrupled in 2024, investors are no longer just betting on AI—they're demanding it deliver, fast. And while Palantir boasts a 20% operating margin and sky-high government demand, tech's broader downtrend and growing scrutiny over AI hype could cool enthusiasm.

TL;DR: Palantir’s quarter was objectively great. But in this market, “great” doesn’t always translate to “up.” When expectations are sky-high, even a whirlwind can feel like a breeze.