Here’s the part that keeps catching people off guard. Palantir shares have fallen roughly 34.7% year-to-date — and the company just reported the best quarter in its history.
That’s not the kind of disconnect you see every day.
What the Numbers Actually Say
Q1 2026 revenue came in at $1.63 billion, up 85% year-over-year, beating the consensus estimate of roughly $1.5 billion. US revenue was $1.3 billion, up 104% year-over-year, with US commercial revenue of $595 million up 133% and US government revenue of $687 million up 84%.
The margin profile is the part that gets overlooked in the valuation debate. Adjusted operating margin reached 60%. GAAP net income attributable to common stockholders was $870.5 million (a 53% net income margin). The company generated $899 million in cash from operations and $925 million in adjusted free cash flow. Those are software numbers. Exceptional software numbers.
On the earnings release, CEO Alex Karp said that revenue growth of 85% in Q1 marked the fastest increase in sales since at least 2020. Management called for about $1.8 billion in Q2 revenue, and raised full-year 2026 revenue guidance to 71% year-over-year growth.
So Why Is the Stock Down?
One word: valuation. PLTR’s forward P/E sits at a very elevated level, and that number doesn’t give investors a lot of room for anything to go wrong. The market priced in a significant amount of growth early — and when that growth arrived on schedule, it was already in the stock.
What’s interesting is that the selloff started after the November 2025 all-time high and has continued despite sequential earnings beats. Palantir has gone from one of Wall Street’s hottest AI stocks to one of its biggest disappointments this year, even as the underlying business accelerates. The stock started Q3 trading near $116, grinding along a level that analysts and frustrated holders have been debating for weeks.
Wedbush has a $230 price target. Palantir’s operating margin was 46% in Q1 on a GAAP basis, and a new partnership with Nvidia to bring Nemotron AI models to sovereign environments was announced after the quarter ended — the kind of catalyst that typically moves defense-oriented software names.
The Government Side of the Story
This is the part people skip. Palantir is partnering with Nvidia to deliver an engine for running NVIDIA Nemotron open models in sovereign environments, with a focus on U.S. government agencies and U.S. critical infrastructure. The defense angle is real, durable, and not easily replicated. Government contracts don’t churn at the same rate as commercial SaaS.
Palantir ended Q1 with $11.8 billion in total remaining deal value, an increase of 98% year-over-year. Cash and short-term investments were about $8.0 billion as of March 31, 2026 — a balance sheet that removes any near-term funding risk from the conversation entirely.
Bull, Base, Bear
- Bull: Q2 revenue beats the roughly $1.8B guide, US commercial sustains 100%+ growth, Nvidia partnership produces visible government contract wins. Valuation compression reverses as growth rates justify the multiple.
- Base: Growth moderates toward 60-70% in the back half of 2026, margins hold above 55%, and the stock trades sideways while the market waits for fiscal 2027 guidance to reset expectations.
- Bear: Any guidance cut or government budget uncertainty triggers multiple compression from a very high forward earnings multiple. The stock’s valuation has no margin of safety if growth decelerates faster than expected.
The Q2 earnings date is the next real decision point. That’s where investors find out whether the 133% commercial growth from Q1 was the peak or a baseline.
What matters is this: the business is running at a pace most enterprise software companies will never reach. The debate is entirely about what someone should pay for it today. That’s a different kind of risk than a broken story — and those two things get confused all the time.
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