Palantir retreats 7% despite strong earnings. What are analysts saying?

Palantir shares fell more than 7% in premarket trading on Tuesday despite a strong quarterly earnings report. Analysts remain confident in the company’s long-term prospects, naming Palantir a top pick in software thanks to strong demand for its AI software products.

“Palantir reported another outstanding quarter with results coming in well above expectations as revenue growth accelerates further due to parabolic US demand for AI solutions. The growth thesis behind Palantir's commercial segment has manifested as [U.S.] commercial revenue surpassed [U.S.] government for the first time. We continue to believe Palantir is the best story in all of software,” D.A. Davidson analyst Gil Luria said, as quoted by Yahoo Finance. Following the results, Luria reiterated his “buy” rating on Palantir at a target price of $250 per share, implying 40% upside from Monday’s close.

“Looking ahead, the shape of this quarter is what reinforces our view that 2027 is the inflection year for AI monetization, and Palantir remains our top pick in software,” Yorkville Ives partner Dan Ives said, according to Yahoo Finance.

Palantir reported 96% year-over-year revenue growth in the third quarter, and the management raised its full-year guidance. Revenue growth has accelerated every quarter since the third quarter of 2023, Barron’s notes. CEO Alex Karp attributed that growth to demand for what he calls “sovereign AI,” which involves giving organizations greater control over the AI models they use. The concept has become a key differentiator for Palantir versus AI model developers such as Anthropic and OpenAI, Barron’s adds.

However, the company also reported slowing growth in the value of new contracts booked with U.S. commercial customers. Investors will “no doubt be looking for evidence in subsequent quarters that 11% growth in U.S. commercial TCV bookings is a fluke of duration and not something structural,” Piper Sandler stated in a note, as quoted by CNBC.

Following the earnings report, Morgan Stanley raised its target price for Palantir to $233 from $205 per share while maintaining its “equalweight” rating. The new target price implies 30% upside from the last close.

“Buy” is the most common analyst recommendation on Palantir, with 27 “buy” and “overweight” ratings, according to MarketWatch data. The stock also has nine “hold” ratings and two “sell” and “underweight” calls.