Why Did Palantir Stock Plunge 8.86% Despite Strong Earnings?

On May 6, 2025, Palantir's stock dropped by 8.86% in pre-market trading, despite reporting better-than-expected earnings the previous evening.

Palantir's first-quarter revenue reached $883.86 million, surpassing analyst expectations of $862.83 million. The company also raised its full-year revenue guidance to between $3.89 billion and $3.90 billion, significantly higher than previous projections. This growth is driven by strong demand for its AI solutions, particularly in the U.S. commercial and government sectors.

Despite the strong financial performance, analysts have differing views on Palantir's future. Dan Ives of Wedbush remains bullish, predicting that the company could reach a $1 trillion market cap within the next 2 to 3 years. However, Brent Thill of Jefferies is cautious about the company's high valuation, which some analysts compare to previous tech high-fliers like Snowflake Inc.

Palantir's CEO, Alex Karp, attributes the government sector's growth to the increasing adoption of its tools by U.S. government departments. He noted that the demand for large language models and supporting software has become a significant trend. However, the company's high valuation and investor profit-taking have led to a stock price decline, with the stock dropping over 8% in after-hours trading.