Palantir's earnings report exceeded expectations, raised full-year guidance, but the stock price fell sharply in after-hours trading

AI hot stock Palantir's first-quarter performance greatly exceeded expectations, and the company significantly raised its full-year guidance. Despite the impressive results, the high valuation faces correction pressure.

On Monday, Palantir announced its first-quarter results, with strong performance in its U.S. government and commercial businesses, with revenue far exceeding Wall Street expectations:

• First-quarter revenue reached $884 million, higher than analysts' expectations of $863 million. This represents a 39% increase from $634.3 million in the same period last year. Adjusted earnings per share were $0.13, in line with market expectations;
• Net income increased to approximately $214 million (earnings per share of $0.08), a significant improvement compared to approximately $105.5 million (earnings per share of $0.04) in the same period last year.
• First-quarter operating profit margin reached 19.9%, a substantial improvement from 12.8% in the same period last year;
• U.S. government business grew 45% to $373 million; while U.S. commercial revenue surged 71% to $255 million.

CEO Alex Karp attributed the growth in government sectors to the broader adoption of its tools by U.S. government departments, noting that the demand for large language models and supporting software has "turned into a craze." However, due to the company's current high valuation and investors taking profits, the stock price faces correction pressure, dropping over 8% in after-hours trading.

The Cost of High Valuation: Even Exceeding Expectations May Not Satisfy Market Expectations

Since Palantir launched its new "AI platform" in April 2023, the AI commercial sector has grown rapidly. The company's stock price has soared from less than $10 per share in mid-2023 to nearly $120, bringing its valuation close to $300 billion.

This year, Palantir's stock has become one of the best-performing components of the S&P 500 index, with a 64% increase in stock price since the beginning of the year, completely ignoring the general downward trend of tech stocks in 2025.

However, from the perspective of the price-to-sales ratio over the next 12 months, Palantir's price-to-sales ratio is 102.3422, making it the highest-valued company in the S&P 500 index, more than double that of the second-place Texas Pacific Land. It is also significantly higher than other companies in the same industry, such as SoftCloud Technology's 32.6396 and FAIR ISAAC's 27.0903.

Additionally, Palantir's price-to-book ratio is 54.066, also far exceeding other companies in the same industry, such as SoftCloud Technology's -587.9655 and FAIR ISAAC's -44.3537Analysts say that for companies with already extremely high valuations, investors expect to see not just performance that meets expectations, but rather surprises that far exceed expectations. This explains why Palantir's stock price still plummeted in after-hours trading despite releasing such strong financial results.

Full-year guidance significantly raised, long-term prospects for AI remain optimistic

With strong growth in its AI business, Palantir has significantly raised its full-year revenue outlook.

• It is expected that this year's revenue will reach between $3.89 billion and $3.90 billion, significantly higher than the $3.74 billion to $3.76 billion forecasted in its last earnings report. The company also expects revenue for the current quarter to reach between $934 million and $938 million;
• Adjusted operating income is expected to be in the range of $1.711 billion to $1.723 billion;
• Adjusted free cash flow is expected to be between $1.6 billion and $1.8 billion.

Karp wrote in a letter to shareholders:

We believe our performance indicates that a revolution is sweeping through our business and industry