Palantir (NASDAQ:PLTR) has undoubtedly been an overwhelmingly successful AI story. The shares have jumped 416% over the past 12 months, and even in the challenging environment of 2025, the stock has bucked the trend with year-to-date gains of 46%.
Yes, some of that surge rides on the AI hype wave, but Palantir has also backed it up with consistently strong earnings. Its data-driven, AI-powered platforms are clearly finding a growing audience. Still, despite delivering another impressive beat-and-raise performance on Monday, the stock took an unexpected turn – dropping 12%.
That reaction stands in contrast to the strength of the numbers. Total revenue reached $883.9 million, up 39% year-over-year and ahead of Wall Street’s forecast of $862.2 million. The U.S. commercial segment, a key growth driver, hit an annual run rate of $1 billion, reflecting 71% y/y growth and accelerating from last year’s 64%. Demand for AIP remains a major tailwind, with U.S. commercial TCV jumping 183% to $810 million. Meanwhile, the remaining deal value in the U.S. hit $2.32 billion, up 127% from a year ago and 30% sequentially, as U.S. enterprise clients continue to adopt Palantir’s flagship products.
Meanwhile, the company also raised its outlook for the year. For FY25, revenue is now expected to land between $3.890 billion and $3.902 billion, an increase from the previous guide of $3.740 billion to $3.760 billion, and well above the Street’s estimate of $3.750 billion. U.S. commercial revenue is expected to grow 68% y/y, up from the prior forecast of 54%, as adoption of AIP continues to accelerate with more enterprises expanding their AI use cases.
So why did the stock fall?
One explanation is down to the beats not being quite as big as they have been in recent quarters. There are also concerns about growth in international markets. Palantir’s international commercial segment, which provides software to overseas businesses, saw a 5% y/y revenue decline in the quarter, generating $142 million, while falling short of Wall Street’s $160 million forecast. Europe’s contribution to total revenue also dropped, shrinking from 16% in Q1 2024 to just 10% in the latest quarter. Add to that a very lofty valuation and the bear case emerges.
However, for Wedbush analyst Daniel Ives, there’s nothing to be bearish about.
“Palantir posted its FY1Q25 results featuring robust beats across the board while raising FY25 guidance yet again as the company continues to capitalize on the AI demand wave with its AIP product moat gaining further traction moving forward,” Ives said.
In fact, Ives is even more confident than he was before as the company is gaining traction across both enterprise and federal landscapes with its “AIP product moat unmatched.”
While some on the Street are pumping the brakes on Palantir due to overvaluation concerns, Ives is doubling down, noting: “We view Palantir as a generational tech name that we see as a trillion market cap over the next three years with PLTR being a core name in the AI Revolution theme over the coming years.”
Backing his bullish thesis, Ives rates PLTR shares an Outperform (i.e., Buy), while lifting his price target from $120 to a Street-high $140. This suggests shares still have room to climb nearly 27% from current levels. (To watch Ives’ track record, click here)
That’s the bull’s take but not many are buying it amongst Ives’ colleagues on Wall Street. The stock only claims a Hold (i.e., Neutral) consensus rating, based on a mix of 11 Holds, 4 Sells and just 3 Buys. Going by the $98.25 average price target, the shares will slip by 11% over the coming months. (See PLTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.