Palantir stock drops 12% amid international growth worries

Palantir‘s stock tumble following its earnings report highlights the growing challenge of meeting market expectations amid its AI-fueled growth trajectory. Despite strong revenue and earnings performance, investors focused on modest guidance updates and international commercial weakness, illustrating how high stock multiples create vulnerability even for companies delivering substantial growth. This reaction underscores the increasing pressure on AI-focused companies to continually exceed expectations as valuations climb.

The big picture: Palantir shares dropped more than 10% Tuesday despite beating earnings expectations and raising full-year revenue guidance.

• Analysts pointed to the company’s modest guidance upgrade, sequential margin decline, and international commercial revenue contraction as possible catalysts for the selloff.
• William Blair analyst Louie DiPalma noted that Palantir’s elevated software multiple makes it “vulnerable” to compression as revenue growth slows.

Behind the numbers: The data analytics and AI software company delivered strong overall performance with revenue rising 39% year-over-year to $884 million.

• Net income grew to approximately $214 million ($0.08 per share), up from $105.5 million ($0.04 per share) in the same quarter last year.
• The company raised its full-year revenue outlook to between $3.89 billion and $3.90 billion.

What they’re saying: CEO Alex Karp expressed strong confidence during the earnings call, declaring that “Palantir is on fire” amid growing demand.

• Karp attributed the company’s performance to “the combination of 20 years of investment and a massive cultural shift in the U.S. which is generating numbers.”
• He emphasized his optimistic outlook for the company’s current market position.

International headwinds: Wall Street analysts highlighted weakness in Palantir’s international commercial segment as a particular concern for investors.

• The segment declined 5% year-over-year after growing 3% in the previous quarter, with management specifically pointing to European challenges.
• Company leadership stated on the earnings call that Europe is “going through a very structural change and doesn’t quite get AI.”

Market context: Palantir has significantly outperformed the broader market in recent periods, continuing momentum from 2024 when it was the S&P 500‘s top performer.

• The stock’s strong prior performance has created elevated expectations and valuation multiples, raising the bar for quarterly results.
• Tuesday’s decline illustrates how even strong growth can disappoint investors when measured against heightened expectations.