Palantir Technologies’ stock tumbled today despite surpassing first-quarter expectations and raising its full year guidance, as concerns over its lofty valuation weighed on investor sentiment. Despite a 60% year to date surge, analysts warn that Palantir’s price to earnings ratio remains extraordinarily high, reflecting expectations of sustained 30-40% annual revenue growth over the next five years.
The company currently trades at 64 times projected 2026 sales, far exceeding competitors like CrowdStrike, which holds the second highest valuation in the software industry at 18 times sales. Even with a potential 70% decline, Palantir would remain one of the most expensive software stocks. While its latest financial results were strong, analysts expect revenue growth to slow slightly in the second half of 2025 or early 2026, potentially dropping from 39% to 36% still among the highest in the sector. With an impressive 44% operating profit margin last quarter, Palantir is executing well, but valuation concerns present a significant challenge.
Even if the company maintains its strong performance, its stock price could face downward pressure due to a lack of valuation support. As the market weighs future growth prospects, the question remains whether Palantir can sustain its momentum or if a correction is on the horizon.