Shares of artificial intelligence (AI) data and analytics platform specialist Palantir Technologies (NASDAQ: PLTR) have cooled significantly in 2026. After more than doubling in 2025 and finishing the year as one of the market’s most talked-about stocks, shares are now down about 23% year to date as of this writing — and they are far below an all-time high of more than $207. Even more, the growth stock‘s pullback contrasts with the broader market, where the S&P 500 is hovering around all-time highs.
So what’s actually going on? On the surface, the slide is puzzling. The company just posted its fastest quarterly revenue growth since going public, and management’s latest guidance raise was the largest in company history. Yet shares remain in the doldrums.
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A blockbuster first quarter
Just look at Palantir’s latest results. First-quarter revenue rose 85% year over year to $1.63 billion — an acceleration from 70% growth in the fourth quarter of 2025 and the 11th consecutive quarter of revenue acceleration. Drill into the geography, and the picture gets even more impressive: U.S. revenue surged 104% to $1.28 billion, with U.S. commercial revenue up 133%. Even the government side held its own, with U.S. government revenue climbing 84%.
And metrics that provide insights into customer relationships look just as healthy. The company’s net dollar retention rate, which measures how much existing customers spend with the company over time, climbed to 150% — up 11 percentage points sequentially. Further, total remaining deal value, or total contracted business yet to convert to revenue, nearly doubled to $11.8 billion.
Profitability is even more striking. Palantir’s non-GAAP (adjusted) operating margin reached 60% in the first quarter, up from 44% a year earlier. And GAAP net income approximately quadrupled to $871 million.
Looking ahead, Palantir raised its full-year 2026 revenue forecast to a range of $7.65 billion to $7.66 billion, implying growth of about 71% for the year.
And CEO Alex Karp leaned into the demand story on the company’s first-quarter earnings call.
“[O]ur biggest problem currently in the U.S. — and why I believe we have 100% growth in the U.S. — is that we just cannot meet demand,” Karp said.
The problem the business can’t fix
Yet strong fundamentals can only justify so much. And this brings us to what’s really weighing on the stock.
Coming into 2026, Palantir traded at a price-to-sales ratio above 100 — a multiple essentially unheard of for a software company of its scale. Even after the year-to-date decline, the stock changes hands at a price-to-sales ratio of about 66 as of this writing. Further, Palantir’s price-to-earnings ratio sits north of 150, and even the forward price-to-earnings ratio is around 100.
That kind of premium means the stakes are extremely high. And there are some risks to watch, so a premium like this may not be justified. While U.S. growth is exceptional, the international commercial business grew just 26% year over year in the first quarter. Further, the 133% U.S. commercial growth, while extraordinary, will eventually lap tougher comparisons.
There’s also the broader environment to consider. With the AI trade now several years in, investors seem to be getting more discerning about which software companies have truly differentiated platforms and which are simply riding the theme. If investors begin concluding that Palantir’s model can be replicated over time by peers, the stock could take a hit.
None of this takes away from what the company is building. The platform has clearly found a significant customer base with a seemingly insatiable appetite for Palantir’s AI platform, and the company’s financial profile is among the best in software.
But there’s a meaningful difference between a great business and a great stock. Even after this slide, the price investors are paying still looks rich compared with what the underlying numbers can justify. The business may keep delivering on its end. The stock, however, may need more time to grow into what the market continues to ask of it.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
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