Shares of Palantir (PLTR 1.44%) slid about 7% over the past five trading days as of this writing, adding to what has become a painful stretch for the artificial intelligence (AI) data and analytics platform specialist. The stock now trades more than 35% below its 52-week high of $207.52 and is down about 26% year to date.
The decline stands in sharp contrast to the business itself, which is growing faster than it ever has as a public company. And that contrast raises a question some investors have likely been waiting years to ask: After such a steep fall, is this finally a good time for long-term AI investors to buy one of the market’s most debated growth stocks?
Even after the pullback, however, the valuation numbers investors must grapple with are still big. Palantir commands a market capitalization of about $306 billion — against trailing-12-month revenue of just $5.2 billion.
Here’s a closer look at the company’s momentum and whether the growth stock is a buy, sell, or hold.
Image source: Getty Images.
Growth that keeps accelerating
Palantir’s first-quarter revenue rose 85% year over year to $1.63 billion — the company’s highest growth rate since it went public in 2020. U.S. revenue, which now accounts for 79% of the total, more than doubled, rising 104%. And U.S. commercial revenue soared 133% to $595 million, helped by new deals with Airbus, Bain, GE Aerospace, and Stellantis during the quarter.
“Our revenue growth rate accelerated for the eleventh consecutive quarter, highlighting the durability of the growth of our business at scale,” said chief financial officer David Glazer in the company’s first-quarter earnings call.
And profitability looks exceptional. First-quarter net income more than quadrupled year over year to $871 million. And adjusted free cash flow for the period came in at $925 million.
“Our free cash flow this quarter is larger than our revenue a year ago in the same quarter. Think about that,” said CEO Alex Karp later in the call.
Looking ahead, management expects the momentum to continue. Alongside the report in early May, Palantir raised its full-year 2026 revenue guidance to $7.65 billion to $7.662 billion, implying 71% growth this year.
But the price is another story
So, why not buy the dip? The answer comes down to valuation — and Palantir’s remains extreme, even after the drop.
The stock’s price-to-earnings ratio is more than 140 as of this writing. Additionally, Palantir’s market capitalization is about 40 times the revenue management expects the company to generate in 2026, and about 70 times the midpoint of its adjusted free cash flow guidance for the year.
A valuation like this leaves little margin for disappointment.
And there are ways Palantir could disappoint. Growth is increasingly concentrated in the U.S., with international commercial revenue rising just 26% year over year in Q1. Further, parts of the company’s international government business face uncertainty. The U.K. government, for instance, said this week it’s reviewing whether to extend or end Palantir’s $441 million contract with the country’s National Health Service when the deal’s initial term expires in early 2027.
Today’s Change
(-1.44%) $-1.90
Current Price
$130.17
Key Data Points
Market Cap
$317B
Day’s Range
$128.80 – $133.18
52wk Range
$122.68 – $207.52
Volume
794.1K
Avg Vol
44.8M
Gross Margin
84.07%
There’s also simple math to consider. Maintaining anything close to 71% growth becomes more difficult each year as the revenue base expands. And if growth merely decelerates, a stock priced for years of extraordinary expansion could get rerated lower — something shareholders have already experienced this year, with shares falling even as the business accelerated.
To be clear, the business arguably deserves its reputation. Excessive demand seems to be Palantir’s most significant problem at the moment (if we can even call that a problem). Karp told listeners on the earnings call that the company’s biggest problem in the U.S. is that it “just cannot meet demand.”
But price matters. Even with the stock down more than 35% from its high, Palantir shares arguably still look overvalued. This may be a meaningful pullback, but I don’t think it’s big enough to make shares attractive.