Copyright Benzinga
Palantir Technologies Inc. (NASDAQ:PLTR) is tumbling more than 7.5% at last check on Tuesday, extending Monday's after-hours losses, despite crushing Wall Street's earnings estimates and lifting its outlook—leaving investors asking what went wrong. Shares of the AI-fueled software company are down more than 8%, leading declines among S&P 500 constituents, just hours after posting one of the strongest earnings reports of the season. According to Benzinga Pro, Palantir reported earnings per share of 21 cents, beating the estimate of 17 cents by 25%, with year-over-year EPS growth of 110%. Revenue reached $1.18 billion, surpassing the $1.09 billion forecast by 8.2%, representing a 62.8% increase from the prior year. Fourth-quarter guidance also beat expectations, with revenue projected to rise another 12% above the Street's forecast, and operating margins expanding by roughly 300 basis points. Yet the stock is getting punished. Why? Too Much, Too Fast? A 170% YTD Rally May Be The Culprit Palantir had surged 170% year-to-date ahead of earnings, making it one of the top-performing stocks in the S&P 500. That explosive rally raised the bar significantly, making even positive results a potential sell-the-news moment. Goldman Sachs analyst Gabriela Borges said in a research note that the stock’s muted reaction comes amid “high expectations” following several strong quarters. MacroVisor analyst Ayesha Tariq said broader market conditions may also be playing a role, with investors shifting into a more cautious stance on richly valued tech stocks. "There seems to be a distinct risk-off mentality in the markets since yesterday," she said, adding that valuation is a growing concern after Palantir's run-up. “While the Palantir earnings themselves were solid, it led to the idea there could be some rerating because of the sky-high valuations,” Tariq added. Currently, the stock trades at about 80 times forward enterprise value-to-sales for 2026 and over 150 times forward free cash flow—multiples far higher than peers with similar growth and profitability profiles. Palantir’s AI and Government Sales Keep Accelerating Despite the stock pullback, Palantir's operational momentum is hard to ignore. The U.S. commercial business grew 122% year over year, up from 92% last quarter, driven by larger enterprise deals and broader AI adoption. The company secured 204 contracts worth over $1 million and closed $1.3 billion in total contract value in Q3—six times higher than a year ago. In the government segment, revenues rose 52% year-over-year. The U.S. Army Vantage program—consolidating 75 contracts into one—could be worth up to $10 billion over the next decade. The company also saw traction for its Operation Warp Speed system with defense contractors like Boeing and L3Harris. A standout in the quarter was Palantir's AI platform (AIP), which is now capable of automating massive migration and development tasks using so-called "AI Foundry Development Environments" or AI FDEs. These tools helped a client shift from a legacy system in just five days—a process that would have taken years with traditional integrators. Is This Just a Healthy Pullback? This looks like a classic case of expectations running ahead of reality. Palantir is proving its strength in AI and government contracts, but with the stock already up 170% this year, even a blowout quarter wasn’t enough to sustain the momentum. Palantir's long-term positioning as one of the few software firms turning AI hype into real revenue remains valid, but at current valuation levels, the market is leaving little room for anything short of perfection. In the near term, volatility may persist as investors reassess whether Palantir's rally has simply outrun its fundamentals—for now. Now Read: AMD’s November Magic Returns—Earnings Could Be The Spark Again Image: Shutterstock
