Wall Street Enthusiastic About Palantir’s Impressive Performance, But Analyst Cautions “Valuation Must Matter,” While Another Predicts Stock Will Stay “Range-Bound”

Please note that this content should not be considered investment advice. The author does not hold any positions in the stocks discussed.

Palantir’s Earnings Highlight Underperformance in Market Expectations

This earnings season, the stock market seems more focused on penalizing underperformers rather than celebrating companies that surpass expectations. A clear illustration of this trend is Palantir Technologies, whose share price saw a perplexing decline of approximately 9% despite reporting a robust quarterly performance. This peculiar market reaction highlights the influence of a macroeconomic environment where downturns are excessively magnified, particularly when companies fall short of ambitiously high whisper numbers.

Understanding Palantir: A Leader in AI-Powered Data Solutions

For those unfamiliar, Palantir is a Software-as-a-Service (SaaS) powerhouse leveraging artificial intelligence to assist businesses and government entities in collecting and analyzing vast volumes of data. This technology enables the identification of hidden insights within intricate datasets, revolutionizing how organizations manage data-driven decision-making.

Q1 2025 Earnings Performance

On Monday, Palantir released its earnings report for the first quarter of 2025, impressively showcasing a ‘Rule of 40’ score of 83%.This indicator suggests robust company health since it combines growth rate and profit margin to evaluate overall performance, with a score of 40% or more signaling strong fundamentals.

In terms of specific results, the company achieved a remarkable 39% year-over-year revenue growth, totaling $883.9 million, comfortably surpassing Wall Street’s expectation of around 36% growth.

Significant Achievements in Revenue and Guidance

Palantir notably exceeded consensus estimates across the board, not only in revenue but also in profits, while also raising its guidance for the future. Analyst insights from Mizuho highlighted that management increased its fiscal year 2025 guidance significantly, exceeding expectations from the first quarter earnings.

Furthermore, Morgan Stanley emphasized Palantir’s operational success, noting the closure of 139 government contracts exceeding $1 million in total contract value (TCV).This included 51 agreements worth over $5 million and 31 surpassing $10 million, driving a quarterly revenue growth acceleration of over 45% year-over-year.

Record Performance in Commercial Segment

On the commercial front, Palantir achieved a remarkable $810 million in contract value during Q1, representing an astonishing 183% increase compared to the previous year. However, the company did experience some setbacks, particularly in its international commercial division, which saw a year-over-year revenue drop of 5%.

HERE’S WHAT ANALYSTS HAVE TO SAY AFTER $PLTR EARNINGS:

1) DA Davidson – $115 PT – NEUTRAL (Raised from $100) – Gil Luria

“Palantir reported a strong quarter with revenue growth accelerating further due to ‘unrelenting’ demand in a seasonally light quarter. Despite recent… pic.twitter.com/7qA1dTOm02

— Wall St Engine (@wallstengine) May 6, 2025

Optimistic Analyst Perspectives

Overall, investor sentiment remains largely positive among Wall Street analysts. Goldman Sachs’ Gabriela Borges remarked that Palantir is well-positioned for sustained growth, driven by the increasing adoption of enterprise AI, efficiency demands in the U. S.government, and the burgeoning interest in Operation Warp Speed from both traditional and new defense players.

“We continue to view Palantir as well positioned to continue to deliver best-in-class growth given the secular trend towards enterprise AI adoption; the continued push for efficiency and technology adoption in the US government; and adoption of Operation Warp Speed among new defense entrants, traditional defense companies, and the broader manufacturing industry.”

Nonetheless, Borges noted some caution, echoing sentiments from Mizuho analyst Gregg Moskowitz, who pointed out concerns around valuation. He emphasized that the current multiple of 60x projected revenues for 2026 is difficult to justify considering the already discounted growth expectations.

Insights into International Growth Potential

Wedbush analyst Dan Ives underscored Palantir’s rising influence in Europe, particularly with its recent partnership with NATO, as more organizations explore the scalability of AI use across various platforms. Palantir’s Maven Smart System is particularly noteworthy as it serves as a battlefield situational awareness platform, integrating data from multiple sources to provide a comprehensive understanding of combat scenarios.

“We view Palantir as a generational tech name that we see as a trillion market cap over the next three years with PLTR being a core name in the AI Revolution theme over the coming years.”

In a related note, Jefferies analyst Brent Thill pointed to Palantir’s encouraging guidance, reflecting a substantial increase in revenues driven by demand for AI solutions. However, Thill also expressed concerns over valuation, indicating that while fundamentals are strong, the current high multiples present a skewed risk/reward scenario.

“Fundamentals are clearly alive, but we think irrational valuation at 56x CY26 rev skews risk/reward negatively.”

Looking ahead, William Blair analyst Louie DiPalma forecasts that Palantir’s revenue growth may decelerate in the second half of 2025, potentially leading to a compression of the stock’s premium valuation as it approaches historical highs. He suggests that Palantir’s stock may remain comparatively stable over the next year.

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