By Adam Levine, Adam Clark and Anita Hamilton
Data-wrangling software company Palantir Technologies reported strong first-quarter earnings results Monday night. Its shares fell Tuesday nonetheless.
While Palantir beat Wall Street expectations on all its key metrics -- sales, adjusted operating margin, and adjusted free cash flow margin -- analysts at Jefferies were quick to point out the weak spots.
Of note were "the slight miss in the U.S. Commercial segment" and "the first deceleration we've seen in the last two years," they wrote in a Tuesday morning note. Palantir reported sales of $595 million, but analysts were expecting closer to $605 million.
They also called out the current quarter's guidance for "not being high enough."
The company and CEO Alex Karp have become political lightning rods, but that didn't slow it down in the first quarter. Palantir is the rare exception of a company that can grow sales by 85% and still garner adjusted profit margins over 50%.
"Our financial results now demonstrate a level of strength that dwarfs the performance of essentially every software company in history at this scale," Karp said in a letter to shareholders.
Palantir stock on Tuesday closed down 6.9% at $135.91. Shares have fallen 23% year this so through Tuesday's close, but have risen around sevenfold over the past two years.
The muted move after earnings is unusual for Palantir. In the past 10 quarters, the average stock move was 16%.
Adjusted earnings per share were 33 cents, above Wall Street's consensus estimate of 28 cents, and up from 13 cents last year. Revenue for the quarter reached nearly $1.63 billion, ahead of expectations of $1.54 billion.
Palantir also provided second-quarter guidance for revenue and adjusted operating income well in excess of what Wall Street was banking on.
The company significantly raised its guidance for the full year.
With roots in U.S. defense and intelligence work, the U.S. remains Palantir's core market. While much of the coverage of the company revolves around its government contracts, it is Palantir's U.S. commercial sales that have been the star of the show. While U.S. government sales grew at a healthy 84% clip in the first quarter, commercial revenue grew by 133% to nearly $600 million. In the first quarter, analysts are projecting U.S. commercial sales to rise by 137% from last year to $605 million.
Because it garners such a high valuation, with the stock trading at 97 times earnings per share for the next 12 months, Palantir gets judged not on whether it beats expectations (now 11 quarters in a row), but by how much it beats.
The stock is frequently volatile after earnings, as investors decide what to make of the report.
"Palantir reported another strong quarter with upside driven by accelerating U.S. demand, continued AIP [Artificial Intelligence Platform] adoption, and continued operating leverage," wrote Cantor analyst Thomas Blakey in a research note.
Blakey reiterated a Neutral rating and $138 target price on the stock, noting that while Palantir's results indicate stronger revenue that previously forecast, valuations of software companies are currently under pressure.
Analyst Brent Thill of Jefferies has long been a fan of Palantir's financial performance, but skeptical of the valuation.
"We continue to view risk/reward as unfavorable. PLTR's fundamentals are exceptional, but the stock requires a heroic durability assumption to justify the current multiple," he said in a Monday night note to clients. "We believe PLTR remains vulnerable to any moderation in AI enthusiasm or even modest headline deceleration."
Thill has a $70 price target on the stock and an Underperform rating.
Palantir software takes an organization's data, which may be spread out across many different systems and formats, and uses artificial intelligence to draw relationships between disparate data points, aiding customers in decision-making. It is one of the few companies that has healthy profit margins selling AI services.
Despite that, Palantir stock has come under the same sorts of pressures as other software companies due to the narrative that "AI will eat software." In the past six months, Palantir declined by 23%, while the S&P 500 is up 7%.
The theme of Palantir's releases and the scripted portion of the earnings call was that Palantir's framework for using AI, grounded in an organization's data, makes it a "non-slop-zone" -- not making the same mistakes as other AI tools.
Karp, who has a PhD in philosophy, is no ordinary CEO, and Palantir's software architecture mirrors concepts from philosophy like ontology, a branch of metaphysics concerned with reality and existence. At Palantir, Ontology is the core truth of an organization's data on which everything else is based.
"We stand on the walls, sentinels of the inner sanctum, against the assault of AI slop," Karp said in his letter to shareholders. "The Ontology is based firmly in reality -- there is, here, a dialectic between ground truth, tribal knowledge, and enhancements."
Write to Adam Levine at adam.levine@barrons.com, Adam Clark at adam.clark@barrons.com and Anita Hamilton at anita.hamilton@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 05, 2026 16:59 ET (20:59 GMT)
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