Palantir stock dropped 9% in after-hours trading on Monday, despite an impressive earnings report for the first quarter of 2025. The AI-driven data analytics company showed significant growth, but the decline in stock price highlights how high expectations can impact performance.
The drop came after Palantir’s earnings for the quarter met Wall Street’s consensus estimate. Although earnings growth was strong, meeting expectations instead of exceeding them led to a post-earnings sell-off. Analysts had already priced in extremely high growth, making it difficult for the stock to maintain its value.
Before the earnings report, Palantir stock traded at 238 times its estimated earnings for the upcoming year. In comparison, major AI chipmakers like Nvidia and Broadcom were trading at 26 and 31 times their projected earnings, respectively. The valuation gap underscores the high expectations investors had for Palantir.
Despite the stock drop, the company exceeded revenue expectations. Palantir’s first-quarter revenue surpassed Wall Street’s forecast, with the company also raising its second-quarter revenue guidance significantly. Additionally, Palantir raised its full-year 2025 guidance for multiple key metrics.
Wall Street had predicted adjusted earnings per share (EPS) of $0.13 on $862.1 million in revenue. Palantir met the profit estimate and easily exceeded the revenue target, with actual revenue falling between $858 million and $862 million. Notably, the company does not provide earnings guidance, but it raised its forecast for the full year.
Palantir also reported impressive cash generation, with $310 million in operating cash flow, reflecting a 139% increase from last year. Its adjusted free cash flow jumped 149% year over year, reaching $370 million. The company finished the quarter with $5.4 billion in cash, cash equivalents, and short-term investments, up from $5.2 billion last quarter. Notably, Palantir has no long-term debt.
Despite the positive financial performance, the stock’s drop underscores how high investor expectations can impact market reactions, even with strong results.
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