Shares in Palantir Technologies tumbled on Tuesday amid the software maker's first quarter earnings report and updated 2025 outlook. The lofty valuation of Palantir stock remains a key investor issue, Wall Street analysts say.
Palantir on Monday reported March quarter earnings that met views while revenue topped Wall Street targets amid strength in its U.S. government and commercial businesses.
On the stock market today, Palantir stock retreated about 12% to near 109 in early trading as the Nasdaq composite also fell.
"The stock is (down) in our view on the skinnier-than-expected Q1 revenue beat of 2.5% and a modest miss in commercial revenue," said UBS analyst Karl Kierstead in a report. "The move lower may also be a function of positioning, with little room for error with the stock. We continue to be very impressed by the fundamental story but valuation remains our key hurdle."
Reported after the market close, Palantir earnings for the first quarter were 13 cents on an adjusted basis, up 62% from a year earlier. Revenue climbed 39% to $884 million, the maker of data analytics software said.
Analysts had predicted earnings of 13 cents a share on revenue of $863 million for Palantir stock.
At Morgan Stanley, analyst Sanjit Singh maintains a neutral rating on Palantir stock. "Palantir continues to prove out that it is one of the clear AI winners in software which has translated to accelerating top-line growth of 30%-plus," he said in a report. "While this represents elite level performance in software, the current valuation makes underwriting a return on Palantir shares extremely challenging."
In addition, Palantir said U.S. government revenue in Q1 rose 45% to $373 million while U.S. commercial revenue jumped 71% to $255 million.
U.S. government revenue was projected to jump 38% to $355 million, with U.S. commercial revenue growing 55% to $232 million, according to Visible Alpha, part of S&P Global Market Intelligence.
Amid strong U.S. growth, Jefferies analyst Brent Thill in a report noted that "international commercial revenue declined 5% year-over-year and 11% quarter-over-quarter, driven by continued headwinds in Europe."
Palantir Raises 2025 Revenue Outlook
For the June quarter, Palantir predicted revenue of $936 million versus consensus estimates of $899.4 million.
For full-year 2025, Palantir raised its revenue outlook to $3.895 billion at the midpoint of guidance, up from a range of $3.74 billion to $3.75 billion.
At Mizuho Securities, analyst Gregg Moskowitz maintains an under-perform rating on Palantir stock.
"Palantir delivered a very good quarter ... as management also raised its fiscal 2025 guidance by much more than the Q1 beat," he said in a report. "We remain quite impressed by PLTR's recent execution, and given its strong positioning and execution, there's no denying that it is deserving of a premium valuation. However, valuation cannot and should not be irrelevant, and we find it very difficult to justify Palantir's very high multiple — 60 times 2026 estimated revenue — that in our view already discounts material acceleration and upside versus consensus expectations."
Heading into the first quarter earnings report, PLTR stock had gained 64% in 2025. Further, Palantir stock hit its all-time intraday high of 125.41 on Feb. 19. PLTR stock trades above its 50-day moving average, a key technical level.
Meanwhile, Palantir's data analytics software has been utilized by government customers for intelligence gathering, counterterrorism and military purposes. It's now targeting generative artificial intelligence applications in health care, energy and manufacturing. Palantir is among artificial intelligence stocks to watch.
Also, Palantir stock holds a Composite Rating of 99 out of a best-possible 99, according to IBD Stock Checkup. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
PLTR stock owns an Accumulation/Distribution Rating of B-plus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral.
Further, Palantir stock has formed a new cup base with an entry point of 125.41, according to MarketSurge.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
