Palantir (PLTR) stock fell 12% Tuesday as investors scrutinized the company’s valuation and declining sales in its international business, even as its first quarter revenue blew past Wall Street’s forecasts.
Palantir’s first quarter revenue in its international commercial segment, which sells software to businesses abroad, posted a 5% decline in the first quarter from the prior year. The segment’s $142 million in revenue was below the $160 million expected by Wall Street analysts.
Europe has declined as a share of Palantir’s revenue from 16% in the first quarter of 2024 to 10% in its most recent quarter.
“Europe doesn’t get AI yet,” CEO Alex Karp said on the company’s post-earnings conference call.
Since 2023, Palantir executives have noted difficulties in that market, as the region has been slower to make large-scale investments in AI and faces slowing GDP growth.
“We saw some early signs of investment in AI in Europe, but it now appears Europe has fallen well behind the US and China who have invested hundreds of billions in AI infrastructure,” Gil Luria told Yahoo Finance in an email Tuesday.
European businesses have increasingly looked to spend money on homegrown AI tech firms as they seek tech “sovereignty” from the US. Additionally, Luria said that Palantir’s “alignment with the Trump administration may be an issue for some European buyers.”
Palantir has benefited from the Trump administration’s controversial immigration agenda. It was recently awarded a $30 million contract with ICE to surveil immigrants, prompting concerns over potential rights violations and backlash from former employees. The company was also awarded a $178 million contract by the US Army in March to develop AI military trucks.
While he supported Kamala Harris during last year’s presidential race, Karp has called Trump “brilliant” and applauded his cost-cutting agenda via the newly created Department of Government Efficiency (DOGE).
Palantir stock was up over 60% this year ahead of Monday’s earnings results. Even with Tuesday’s drop, the stock had gained over 45% in the past month alone.
Overall, Palantir’s first quarter earnings surpassed analyst expectations. Palantir’s revenue of $884 million for the March period was ahead of the $863 million expected by Wall Street analysts, driven by a 71% jump in its US commercial business — which sells its AI-fueled data analytics software to companies such as Citi, Hertz, and BP — and a 45% climb in the company’s revenue from US government contracts.
Its earnings per share of $0.13 were in line with estimates, according to Bloomberg data.
The company — whose software does everything from supply chain analysis to surveillance and identifying military targets, to the chagrin of human rights advocates — also raised its 2025 revenue outlook to a range between $3.89 billion and $3.9 billion, up from its prior estimate of $3.75 billion.
“PLTR delivered strong results,” wrote Jefferies analyst Brent Thill while maintaining his Underperform rating on shares.
But he added that “while fundamentals have strengthened in recent quarters, PLTR’s valuation at 56x CY26E rev [56 times its 2026 calendar year revenue] has risen to unprecedented levels,” noting that Palantir’s valuation was “irrational.”
Read more about Palantir’s stock moves and today’s market action.
Palantir is still inking contracts with foreign governments, including Europe, where the company has historically had a broad reach. The company’s government revenue from abroad rose 44% to $114 million, ahead of Wall Street analysts’ projections, according to Bloomberg, even as its sales to international businesses fell.
The stock’s drop Tuesday shaved roughly $35 billion from the company’s market cap.
Palantir bull Dan Ives remained optimistic on Palantir after its earnings report Monday, raising his price target on the stock to $140 from $120: “We view Palantir as a generational tech name that we see as a trillion market cap over the next three years with PLTR being a core name in the AI Revolution theme over the coming years.”
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
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