Palantir Technologies (NASDAQ: PLTR) is down just over 10% since its May 4 earnings report as of the May 13 close. The earnings report was exceptional on every level, but it wasn’t enough to convince the company’s skeptics to push the buy button.
In fairness, there’s a lot of noise surrounding Palantir that has nothing to do with the earnings report. The stock initially dropped on concerns over the impact artificial intelligence (AI) would have on software stocks.
It’s a legitimate macro conversation. However, it assumes that Palantir is a passive software company waiting to be disrupted.
But to the contrary, this company is the one doing the disrupting, and it continues to do just that on both the government and the commercial side.
What the Earnings Actually Said
The Q1 2026 results were historically good. Palantir posted revenue of $1.63 billion, an 85% year-over-year increase, and the fastest top-line growth the company has delivered since its 2020 direct listing. The quarter marked the company's 11th consecutive period of revenue acceleration. That’s a streak that most large-cap software companies can't come close to matching.
U.S. revenue crossed the 100% threshold for the first time since going public, rising 104% year-over-year to $1.28 billion. On the commercial side, domestic revenue surged 133% to $595 million. Government contracts contributed $687 million, up 84%. Net income nearly quadrupled to $870.5 million compared to $214 million in the same period a year ago. The company's Rule of 40 score, a key metric combining revenue growth and profitability, hit 145%, among the highest ever recorded for an enterprise software company of this scale.
Management didn't just beat estimates; they raised the full-year revenue guidance to $7.65–$7.66 billion, implying 71% growth for 2026 and clearing the analyst's consensus by nearly $400 million.
The Valuation Debate—And Why It Keeps Losing
Palantir critics are hyper focused on the firm's short-term valuation. The company’s valuation is extreme. It factors years' worth of exceptional performance into the current price. And, the critique goes, what happens to the share price if the company can’t deliver those results?
However, these are the same arguments that have been made with PLTR at $20, $50, $100, and $180. They weren’t any less right. But every single time, the people who weren’t buying missed the next leg up. The critique isn't wrong; it's just not useful. In the case of PLTR, the only shots investors have missed are the ones they didn’t take.
A longer-term view of Palantir shows a company that’s been growing its business at 75% to 100% annually. At that rate the profits are bound to follow—a point that Palantir CEO, Dr. Alex Karp made in his letter to shareholders. Karp noted that Palantir made as much profit in the first quarter as it did in revenue just 12 months ago.
The Palantir Critics Are Arguing Among Themselves
The critique about Palantir is the same today as it’s been for several years. But it doesn’t really matter to many retail investors. And here’s why. Consider investors who bought the stock below $20 or even below $10, rode it to above $180, and probably took out their initial investment along the way.
These investors are now sitting on pure profit. They’re not losing sleep about valuation, and they aren’t going to apologize for having conviction in PLTR. That's why the valuation debate rings hollow. At this point, it’s well-meaning investors who are content in being “right” but missed out and continue to miss out on a one-of-one company.
Analysts Are Raising Their Targets
It’s always important to pay attention to what analysts do, perhaps more than what they say. PLTR’s consensus price target is $195.16, almost 50% above mid-March levels. It’s also more than double where it was one year ago.
Here again, some critics will note that the consensus price hasn’t increased much over the last three months. But since the earnings report, Rosenblatt Securities raised its price target to $225 from $200; Citigroup also went to $225 from $210. And, of course, Dan Ives from Wedbush reiterated his $230 price target for PLTR.
Institutional buying is another addition to the story. Two recent 13-F filings show that multiple Vanguard funds have started new positions in PLTR. The purchases total 195,923,062 shares, which comes out to roughly $27 billion as of May 8, the day of purchase.
What the Dip in Palantir Actually Represents
PLTR is going through a healthy, and normal, consolidation. Like gold above $5,000, Palantir stock trading above $200 was trading in rarefied air. Palantir’s inability to hold that big number isn’t a sign that the business model is flawed; it just showed that even the bulls need time to reset.
And what’s happening with PLTR is a reset. But it’s one that current shareholders are likely to look back on the same way they’ve viewed every other dip. The company’s earnings results are obviously not enough to win over the valuation skeptics. But being right about the valuation and being right about the stock are two very different things.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
