Palantir’s blowout quarter: Buy the dip or brace for a reset?

Palantir’s blowout quarter: Buy the dip or brace for a reset?

Charu Chanana

Chief Investment Strategist

Key points:

  • Strong fundamentals, soft reaction: Palantir beat revenue estimates, raised guidance, and delivered strong commercial and government growth—but the stock dropped over 9% post-earnings, reflecting valuation fatigue after a 400% rally in the past year.
  • Strategic expansion continues: Recent partnerships with NATO, ICE, Databricks, Qualcomm, and TWG Global signal Palantir’s growing role in defense, finance, and industrial AI—positioning it across both cloud and edge ecosystems.
  • Valuation and execution risks loom: Despite robust performance, the stock trades at premium multiples with elevated expectations. Slower international growth, intense competition, and macro uncertainty pose risks to sustained upside.

This content is marketing material.


Palantir Technologies delivered a robust Q1—topping revenue estimates, maintaining profitability, and raising its full-year outlook. Yet the stock dropped more than 9% in after-hours trading, reflecting the pressures of sky-high expectations and stretched valuation

With Palantir shares up nearly 400% over the past year, the question facing investors is whether this is a healthy correction in a high-momentum stock or a warning sign that valuations have outpaced fundamentals.

Strong earnings and upbeat guidance

Palantir’s results reflected broad-based strength.

Financial Highlights:

  • Revenue: $883.9M (vs. $862.8M est), +39% YoY
    • U.S. Commercial: $255M (+71% YoY)
    • U.S. Government: $373M (+45% YoY)
  • Adjusted EPS: $0.13, in line with estimates
  • Free Cash Flow: $370M (adjusted); $310M in operating cash flow

Customer & Deal Growth:

  • Total customer count +39% YoY
  • 139 deals >$1M; 51 deals >$5M
  • Major wins include NATO and broader U.S. military expansion via Maven AI

Guidance:

  • FY25 Revenue: Raised to $3.89B–$3.90B (vs. $3.74B–$3.76B prior)
  • Q2 Revenue: Guided at $934M–$938M (vs. $899M est)

Palantir management continues to highlight its role in national defense and the “reindustrialization of America,” positioning itself at the intersection of AI innovation and sovereign resilience.

Why the market reaction?

The selloff reflects valuation tension more than fundamental weakness. Key considerations include:

  • The stock had gained nearly 400% over the last year and over 65% year-to-date prior to earnings
  • Palantir trades at a price-to-sales ratio north of 70x, placing it well above the broader software sector average of less than 10x.
  • Technical indicator Relative Strength Index (RSI) was above 70 pre-earnings, signaling overbought conditions
  • Analyst consensus remains cautious, with the 12-month target price of $91.87, implying significant downside from current levels ($123.77 as of May 5 close)
  • Palantir’s market cap exceeds $290 billion, making it larger than traditional defense giants such as Lockheed Martin and RTX

This suggests that much of the good news may have already been priced in, leaving limited room for upside surprises.

Strategic partnerships signal long-term opportunity

Beyond the quarterly numbers, Palantir’s recent partnerships and product rollouts highlight its growing strategic role in the AI and defense ecosystem:

  • NATO collaboration: Palantir’s Maven Smart System (MSS) is now supporting NATO’s efforts to modernize military capabilities, including intelligence fusion, battlespace awareness, and decision-making. The partnership strengthens Palantir’s international footprint and could pave the way for similar collaborations with other U.S. allies.
  • U.S. Immigration and Customs Enforcement (ICE) – In April 2025, Palantir secured a $30 million contract to develop the Immigration Lifecycle Operating System (ImmigrationOS), enhancing ICE's deportation support capabilities.
  • Databricks integration: Palantir announced a product integration with Databricks, combining its AIP operating system with the Databricks Data Intelligence Platform. This integration enables scalable, real-time AI-driven workflows with enterprise-grade governance through Palantir’s Ontology and Databricks’ Unity Catalog.
  • Qualcomm collaboration: Palantir is expanding to edge AI with Qualcomm, allowing its software to run on next-generation edge computing platforms — a move that extends its addressable market to industrial, defense, and IoT environments.
  • TWG Global joint venture: Palantir entered a joint venture with TWG Global to bring its AI capabilities deeper into the financial services industry, indicating growing traction in capital markets.

These announcements enhance Palantir’s positioning across both the cloud and edge AI stacks, while reinforcing its appeal across high-value verticals including defense, manufacturing, and finance.

Key risks

Investors should remain mindful of several downside risks:

  • International commercial headwinds: Growth outside the U.S., particularly in Europe, has been slower. Regulatory complexities, geopolitical dynamics, and slower AI adoption rates may limit near-term expansion abroad.
  • Competitive landscape: Palantir faces competition from hyperscalers such as Microsoft (Azure), Amazon (AWS), and Google (Cloud/Vertex AI), as well as from data-native players like Snowflake and Databricks. Increased pressure on pricing, features, or integration may affect Palantir’s market share.
  • Customer concentration: Government contracts, while lucrative, are inherently lumpy and politically influenced.
  • Technological disruption: The pace of AI and software innovation is accelerating. Failure to evolve its platforms or keep pace with open-source and modular alternatives could erode Palantir’s differentiation over time.
  • Macro, geopolitical and regulatory risks: Higher rates, geopolitical tensions, or regulation around AI/defense could weigh on demand and valuations.
 

Investment implications

Long-term view: Selective accumulation

For investors focused on long-term structural themes, Palantir’s positioning in AI, defense-tech, and national security makes it a compelling strategic asset. The company's consistent profitability, commercial momentum, and deepening ties with government agencies support its long-term potential. Investors may consider scaling in gradually during periods of weakness, particularly if the stock consolidates at more reasonable valuation levels.

Short-term view: Elevated risk of volatility

For tactical or short-term investors, caution may be warranted. The elevated valuation, overbought technical conditions, and high expectations create a challenging setup. Absent new catalysts, Palantir may be vulnerable to further multiple compression, particularly in a risk-off macro environment.

Conclusion

Palantir’s Q1 report confirms its momentum and market relevance, particularly in the evolving AI and defense landscape. However, the stock’s reaction underscores that even strong execution can fall short when valuations are stretched.

For long-term investors, the current pullback could provide an opportunity to gain exposure to a differentiated AI play. Shorter-term traders, however, may want to wait for clearer technical support or a reset in multiples.

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

The information on or via the website is provided to you by Saxo Bank (Switzerland) Ltd. (“Saxo Bank”) for educational and information purposes only. The information should not be construed as an offer or recommendation to enter into any transaction or any particular service, nor should the contents be construed as advice of any other kind, for example of a tax or legal nature.

All trading carries risk. Loses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money.

Saxo Bank does not guarantee the accuracy, completeness, or usefulness of any information provided and shall not be responsible for any errors or omissions or for any losses or damages resulting from the use of such information.

The content of this website represents marketing material and is not the result of financial analysis or research. It has therefore has not been prepared in accordance with directives designed to promote the independence of financial/investment research and is not subject to any prohibition on dealing ahead of the dissemination of financial/investment research.

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.