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Further Reading from MarketBeat
Palantir Drops After a Blowout Q1—What Investors Should KnowBy Chris Markoch. Publication Date: 5/5/2026. 
Key Points
- Palantir stock dropped despite massive Q1 earnings beat and triple-digit revenue growth in key segments.
- Analysts are raising price targets while valuation concerns and Michael Burry’s short position weigh on sentiment.
- Strong government and commercial growth highlight long-term upside, but near-term volatility may persist.
- Special Report: Have $500? Invest in Elon’s AI Masterplan
Palantir Technologies (NASDAQ: PLTR) delivered a blockbuster Q1 2026 earnings report after the market closed on May 4. But 85% year-over-year (YOY) revenue growth and a Rule of 40 score of 145%, among other highlights, weren’t enough to excite investors. PLTR fell 7% the day after the report. The predictable concern was the company’s valuation. Palantir reported earnings per share of 33 cents, which was 5 cents above estimates for 28 cents. The number was also 153% higher YOY. On a GAAP basis, the earnings beat was even more impressive. GAAP EPS of 32 cents was 325% higher YOY.
To put that in even greater perspective, Palantir chief executive officer Dr. Alex Karp made this observation in his letter to shareholders: “Indeed, we generated nearly as much in profit in the first quarter of the year as we did in revenue only twelve months ago.” This helps explain the PLTR price action. Analysts are projecting earnings growth of around 43% in 2026, but the company appears to be on pace to do far better than that. Still, critics of Palantir’s valuation only need to be right once. And at least the day after earnings, momentum was on their side. Government and Commercial Growth Both Accelerate—A Rare DoubleAs in the past several quarters, Palantir posted strong growth on both the government and commercial sides of its business. U.S. commercial revenue grew 133% YOY to $595 million, and U.S. government revenue grew 84% YOY to $687 million. It’s hard to understate the importance of this growth, as Palantir critics continue to miss the massive commercial expansion taking place. The company was born through its business with the U.S. government, but it has become much more than that. As the numbers show, both sides of the business continue to grow and grow strongly. In fact, Palantir raised its full-year outlook for both revenue and earnings. That’s impressive after the quarter it just posted. Wall Street Is Raising Targets While Burry Shorts the CEOThe real signal for Palantir investors comes from the analyst community. Dan Ives of Wedbush was quick to reiterate his Outperform rating and $230 price target for PLTR. Rosenblatt Securities also reiterated a Buy rating and raised its price target from $200 to $225. It’s worth noting that some analysts have been lowering their price targets on the stock. Even so, that appears to reinforce a range-bound pattern that has been in place for much of this year. There’s also more news from one of Palantir’s favorite bears, Michael Burry, who says he is now outright shorting PLTR. However, Burry said he’s not just shorting the stock based on valuation. He’s “shorting the business model. I am shorting the entire premise upon which the company rests. I am shorting the CEO.” This continues a feud between Burry and Karp that dates back to the end of 2025, when Burry announced he had taken out put options against PLTR. The stock is down over 20% in 2026, and institutional selling outpaced buying in the first quarter. Some would say that proves Burry right. Others would call it a broken clock. Is Palantir Being Punished for Its Past Success?The reality of Palantir in 2026 is different from what it was just a few years ago. Investors who expect the stock to climb 550% in the next five years, as it has in the last five years, will likely be disappointed. The company has a lot of growth priced into it. But that doesn’t mean it isn’t worth a premium valuation. Institutions will continue to own PLTR, and analysts, with some exceptions, continue to raise their price targets. It’s possible that PLTR will continue to chop around in 2026 while investors sort out the winners and losers in the AI software space. But, as was the case in 2021 and 2022, that patience is likely to be rewarded for retail investors, many of whom are content to hold the stock after taking out their initial investment. The Eye Test Still Matters—And Palantir Keeps Passing ItPalantir is a victim of its own self-fulfilling prophecy. At this point, the critics have little else to say beyond valuation, and they are confident that, eventually, it will be reflected in the stock price. I’m not going to argue math with anyone. That’s like debating metrics such as expected batting average or WAR+ with baseball purists. But in sports, as in investing, the eye test still matters. Palantir isn’t going to make the cut for investors who focus solely on valuation. There are plenty of other stocks they can own and still sleep at night. However, the eye test is compelling. Look at it this way: if you had one player to send to the plate for a crucial at-bat in a “gotta have it” moment, there are a lot of players who wouldn’t check the boxes as great hitters. But would you bet against them in that moment? Probably not. That analogy works for Palantir on two levels. Palantir not only met the moment, it crushed it. Furthermore, it suggested there’s even stronger growth to come, which almost doesn’t seem possible. That would be dubious, except that Palantir has continued to deliver surprise after surprise. But it also illustrates what Palantir means to its customers on both the commercial and government sides. They rely on Palantir's Ontology to deliver insights they can’t get in any other way. It’s not a valuation darling. Its business model is misunderstood and, in some cases, misrepresented. But investors who are waiting for PLTR to earn the analysts’ stamp of approval will be waiting a while. Meanwhile, the stock is likely to move higher over time. |
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