Palantir Technologies just turned in a quarter full of strong growth, solid cash flow, and optimistic guidance, yet the stock slid 9% as if it had stumbled badly. This seems like a curse of the tech overachiever, getting injured for not absolutely stunning everyone, even while beating expectations.

Palantir Technologies’ stock dropped 9.3% during after-hours trading on Monday in the wake of a solid first quarter earnings report for 2025. Despite demonstrating pretty robust growth on the top line and beating revenue expectations, the earnings figures only managed to meet Wall Street forecasts. It easily translated into disappointment for investors, as for a stock having high valuation especially like Palantir’s, keeps the investors wanting more.

Shooting For the Stars

Palantir’s pricing into earnings was literally a perfection. Valued at 238 times forward earnings, the window for anything less than stellar performance was extremely slim. While rivals such as Nvidia and Broadcom trade forward at multiples of 26 and 31 respectively, the exorbitant price-to-earnings ratio on Palantir magnified any perceived shortfall, even in the bright light in an otherwise fundamentally sound quarter.

An Exceptional Quarter by Numbers

Palantir’s Q1 was stellar, according to the figures:

  • Total revenue went from $634 million in 2024 to $884 million in Q1 2025
  • Adjusted EPS landed at $0.13 on target on Wall Street’s estimated revenue forecast of $862.1 million
  • Cash from operations shot up by 139%, to about $310 million
  • Free cash flow gained 149% at $370 million year-over-year
  • Commercial revenues grew by 33% to $397 million and government revenues climbed by 45% to $487 million
  • U.S commercial revenue increased by 71% year on year to $255 million, along with overall numbers from the total U.S Commercial revenue growth stood at 71%.
  • Total customers increased to 39%
  • Deal volume remained robust with the company closing 139 deals over $1 million, 51 deals of at least $5 million, and 31 deals of at least $10 million.
  • The company finished the quarter, up from $5.2 billion in last quarter to $5.4 billion cash and absolutely no long-term debt.

Forecasts for the Next Quarter

In Q2 2025, Palantir’s forecasts are as follows:

  • Revenue of between $934 million and $938 million, a 38% growth year-over-year, beating a consensus forecast of $899 million
  • Adjusted operating income of $401 million to $405 million, representing 58% to 60% growth year-over-year.

The fact that full-year guidance was raised across a series of metrics proves that conviction is being built up with regard to the commercial and government businesses.

Long-Term Outlook is Intact

It seems like currently Palantir is a victim of its own hype, a warning that momentum stocks are always priced at perfection. For long-term bulls, the business structure of Palantir looks tempting. Ramping-up growth in U.S commercial revenue, solidity in government contracts, and great cash generation tells the story of a business with a strong future in AI and data analytics. Investors will have to be mindful of valuation risk, as dollar-cost averaging is a better play, limiting exposure to short-term volatility.