Palantir (PLTR) reported strong first-quarter results after the close on Monday, showcasing rapid growth across its U.S. operations — but that wasn’t enough to satisfy Wall Street. Shares of the AI and data analytics software provider dropped as much as 15% on Tuesday, a sharp slide for a stock that’s risen almost 1,000% in the last 5 years.
The military contractor’s revenue rose 39% year-over-year to $884 million, topping forecasts, and GAAP net income came in at $214 million, or $0.08 per share. Adjusted earnings per share were $0.13, with free cash flow hitting $370 million for a 42% margin.
The highlight was Palantir’s U.S. commercial business, where revenue soared 71% year-over-year to hit a $1 billion annual run rate. U.S. government revenue was also strong, up 45% from a year ago. CEO Alex Karp described the company as delivering “the operating system for the modern enterprise in the era of AI,” pointing to a record $810 million in U.S. commercial contract value booked during the quarter.
In a brassy letter to shareholders in which he quoted both Nixon and Saint Augustine, Karp spoke of how: “The rush towards large language models, as well as the foundational software architecture that is capable of making them valuable to large organizations, has turned into a stampede.”
“What was once a relatively orderly process of assessment and evaluation of these novel technologies has evolved into a ravenous whirlwind of adoption as an increasing number of institutions grasp the magnitude of the shift that is washing over industry and government,” he wrote.
Per the earnings release, Palantir “closed 139 deals of at least $1 million, 51 deals of at least $5 million, and 31 deals of at least $10 million.” Customer growth remained strong, up 39% year-over-year, and the company raised its full-year revenue outlook to as high as $3.902 billion, with adjusted operating income projected at up to $1.723 billion.
The company expects second-quarter revenue between $934 million and $938 million, and ended the quarter with $5.4 billion in cash and short-term Treasuries.
Still, investors may be balking at valuation and decelerating sequential growth — overall revenue grew just 7% quarter-over-quarter. With AI hype already priced in, expectations are sky-high, and even a solid beat wasn’t enough to keep shares afloat.
The Rule of 40 — a metric combining revenue growth and profitability that’s often used to assess high-growth software companies — came in at 83%, the company was quick to point out. It’s a strong figure but short of the 100% mark some investors may now be using as a benchmark.
The drop also comes as broader enthusiasm for AI stocks is tested. In a new note, Goldman Sachs (GS) warned that recent tech gains in stocks may resemble “bear market rallies,” with valuations vulnerable to any signs of slowing momentum. For richly valued names like Palantir, that bar may now be higher than ever.
What’s more, Palantir did not break out international performance, but with overall revenue up just 7% from Q4, some analysts suspect global sales may be flat or under pressure — especially as U.S. growth now dominates the top-line.
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