AI Earnings Season Splits Software: Palantir Up 30% as Datadog and Figma Drop 15%+

Software Prices Split on Proof of AI Monetization

This week's software earnings did more than move a few tickers. They highlighted a stricter market standard: investors want hard proof that AI demand is translating into revenue, margins, and guidance. Datadog, Figma, and HubSpot all plummeted more than 15% after earnings, while Palantir stood out, with shares skyrocketing by nearly 30% and jumping 14.97% to around $144.45 in after-hours trading.

What bulls and bears are arguing

The bear case is straightforward: AI can be expensive, and software companies may absorb those costs before revenue catches up. Figma explicitly flagged rising AI inference spending and said it currently bears the cost of inference without offsetting consumption revenue from beta products. That mattered even though both Datadog and Figma beat on revenue and earnings. In this environment, a routine beat is no longer enough if investors think AI is pressuring margins or future economics.

Palantir won the week's attention because the financial response was hard to ignore. It reported revenue of approximately $1.94 billion and raised its full-year 2026 outlook, while the stock moved sharply higher in after-hours trading and then closed near the top of that nearly 30% gain. Bulls see that as evidence that AI leaders can still keep re-rating when results convert into revenue and guidance. Bears see a stock already priced for perfection. Either way, the market clearly favored proof over narrative.

Palantir's rally rested on revenue growth, guidance, and commercial momentum

Palantir did not just talk about AI demand; it showed that demand in its results and outlook. Revenue of approximately $1.94 billion grew 93% from a year ago, and adjusted EPS of $0.41 also beat expectations. For a market that has grown skeptical of AI storytelling, those are convertible numbers.

Where the upside came from

The most important breakdown was commercial. U.S. commercial revenue surged 149% to $764 million, far outpacing the company's overall growth rate and underscoring the segment investors care about most when evaluating repeatable AI demand. Management also guided to roughly $8.15 billion to $8.16 billion in full-year 2026 revenue, a meaningful lift from prior expectations. That combination-strong reported results, faster commercial growth, and a higher bar ahead-created a clear earnings separation from peers.

Why investors kept buying

Palantir also gave investors more than a headline beat. U.S. commercial and government businesses grew faster than expected, and management raised full-year revenue guidance by nearly $500 million. In the reported quarter, the company also generated $1.22 billion in adjusted free cash flow and ended with $13.1 billion in total remaining deal value, up 83% year over year. That helped the quarter read less like marketing and more like demand pulling through the business.

Valuation, not demand, is the next debate

The core bull argument is that Palantir weakened the case that enterprise AI spending remains mostly hype. The core bear argument is that the stock is now priced for continuation, with the 52-week range sitting at $106 to $208 and the share price near the top of that range after the move. That is the real tension: investors are rewarding visible monetization, but the next quarter still has to support a premium valuation.

Datadog and Figma showed why a beat is no longer enough

Datadog: a small margin miss changed the message

Datadog beat revenue and EPS expectations, but investors focused on adjusted gross margin of 80% versus 80.7% consensus. On the surface, that looks minor. In this market, it mattered. The takeaway was not that growth failed; it was that profitability came in slightly softer than expected at a time when investor confidence was already fragile.

Figma: strong revenue still did not offset AI cost concerns

Figma reported revenue of $370.1 million, up 48% year over year, yet the stock still sold off sharply. The issue was not current revenue. It was the cost attached to future revenue. Figma said it currently bears the cost of inference without offsetting consumption revenue on beta products and warned that gross margin will vary from quarter to quarter in the near term. That shifts the investor question from "Is it growing?" to "Who is paying for AI, and at what return?"

Why the selloff spread across software

Datadog, Figma, and HubSpot all dropped more than 15% after earnings, and other software names also came under pressure as investors judged results through an AI-cost lens. The reaction suggests that, for now, the market is rewarding companies that show AI is being paid for and penalizing companies that may still be funding AI investment out of existing models.

What to watch next

• Datadog: Whether gross margin recovers toward or above prior expectations.
• Figma: Whether AI spending eventually connects to paid usage, pricing, or consumption-style revenue.
• The group: Whether guidance confidence improves quickly enough to frame these quarters as temporary timing issues rather than deeper model issues.

What would challenge the selloff

If Figma begins charging for beta AI usage, or if Datadog consistently defends margins above the low-80s without weakening demand, the market may stop treating these companies primarily as AI cost centers. For now, though, the earnings message is clear: software investors want proof that AI spending is producing offsetting revenue.