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Palantir Drops After a Blowout Q1—What Investors Should KnowWritten by Chris Markoch. Article Published: 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: Your book is inside
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 soothe investors: PLTR fell about 7% the day after the report. Much of the concern centered on valuation. Palantir reported diluted EPS of $0.33, five cents above the $0.28 consensus — a 153% YOY increase. On a GAAP basis, EPS of $0.32 was up 325% YOY.
As Palantir CEO Dr. Alex Karp observed 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.” That helps explain the disconnect between the operating results and the stock price. Analysts project roughly 43% earnings growth in 2026, and Palantir appears on pace to outperform that. Still, critics only need to be right once, and for at least one trading session after the print, momentum favored the bears. Government and Commercial Growth Both Accelerate—A Rare DoubleLike previous quarters, Palantir posted strong growth across both government and commercial segments. U.S. commercial revenue rose 133% YOY to $595 million, while U.S. government revenue increased 84% YOY to $687 million. It’s worth underscoring the importance of that commercial expansion: Palantir was built on government work, but it has become much more than that. As the numbers show, both sides of the business continue to grow materially, and the company raised its full-year outlook for both revenue and earnings — an impressive move after such a strong quarter. Wall Street Is Raising Targets While Burry Shorts the CEOAnalysts reacted quickly. Dan Ives of Wedbush reiterated an Outperform rating and a $230 price target for PLTR, while Rosenblatt Securities reiterated a Buy rating and raised its target from $200 to $225. Some analysts have trimmed targets, which would be consistent with a range-bound trade that’s dominated the stock this year. Meanwhile, one of Palantir’s most vocal skeptics, Michael Burry, said he is now outright shorting PLTR — not just the valuation but “the business model. I am shorting the entire premise upon which the company rests. I am shorting the CEO.” That continues a feud that dates to late 2025, when Burry disclosed put options against PLTR. The stock is down more than 20% in 2026, and institutional selling outpaced buying in the first quarter. Some see that as vindication for bears; others view it as a temporary dislocation. Is Palantir Being Punished for Its Past Success?Palantir in 2026 is not the same story it was a few years ago. Investors expecting a repeat of the roughly 550% gain over the past five years may be disappointed: much of the company’s growth is already priced in. That said, a premium valuation can still be justified. Institutions remain holders of PLTR, and most analysts (with a few exceptions) have lifted price targets. It’s possible the stock will chop through 2026 while the market sorts winners and losers in the AI-software landscape. As in 2021 and 2022, patient retail investors who hold through volatility could be rewarded — many have already covered their initial cost basis and are content to hold for longer-term upside. The Eye Test Still Matters—And Palantir Keeps Passing ItPalantir faces a self-fulfilling prophecy: critics default to valuation as a reason to avoid the stock, confident the market will eventually reflect that view. I’m not going to argue the math with anyone — valuation matters — but the qualitative "eye test" still counts. If you had one player to send to the plate in a high-leverage situation, you’d choose someone you trust to perform. Palantir has repeatedly met those high-leverage moments and often exceeded expectations, suggesting stronger growth may still be ahead. That performance is why customers across commercial and government sectors continue to rely on Palantir's ontology to deliver insights they can’t get elsewhere. Palantir may not be a valuation darling, and its business model is often misunderstood or mischaracterized. But investors waiting for unanimous analyst endorsement may be kept waiting. Meanwhile, the combination of robust results, raised guidance and long-term customer dependency suggests the stock could move higher over time.
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