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Palantir Is Down Big This Year. The Business Has Never Been Stronger.

Here’s the part that keeps catching people off guard. Palantir shares hit a 52-week low of $106.37 on June 25, down roughly 40% from where the year started, and the company just reported the best quarter in its history.

That’s not a 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%. It was also the eleventh consecutive quarter of accelerating revenue growth, a streak that is genuinely rare for a company this size.

The margin side of this story gets buried in the valuation debate. Adjusted operating margin reached 60%. GAAP net income was $870.5 million, representing a 53% net income margin. The company generated $899 million in cash from operations and $925 million in adjusted free cash flow. Those are exceptional software numbers, full stop.

CEO Alex Karp called the 85% revenue growth in Q1 the highest-ever year-over-year rate since Palantir went public. Management guided for Q2 revenue of $1.797 to $1.801 billion and raised full-year 2026 revenue guidance to $7.65 to $7.662 billion, implying roughly 71% year-over-year growth. That guidance raise was 10 points above what they guided the prior quarter, their largest guidance increase ever.

So Why Is the Stock Down?

One word: valuation. PLTR’s forward P/E sits around 80x even after the selloff, and that number leaves almost no room for anything to go wrong. The market priced in a huge amount of growth early in 2025. When that growth arrived on schedule, it was already reflected in the price.

What’s interesting is that the selloff started after the all-time high of $207.52 in November 2025 and has continued despite back-to-back earnings beats. The stock touched a 52-week low near $106 in late June, briefly down more than 40% year-to-date, before bouncing back toward $125. The business is accelerating. The stock has been doing the opposite. Those two things can coexist for a while, and they usually resolve eventually, one way or the other.

Slight tangent, but it matters: this kind of valuation compression is not the same as a broken business. The debate here is entirely about what someone should pay for a company growing at 85%. That’s a different kind of risk than a company missing numbers or losing customers. Wedbush still carries a $230 price target. Wolfe Research recently upgraded PLTR to neutral while calling it the best enterprise AI product-market fit in the market today. Neither is pounding the table. Neither is walking away.

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 copied. 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 stood at roughly $8 billion as of the most recent quarter, with total debt of only $212 million. That balance sheet removes any near-term funding concern from the conversation entirely.

Customer count crossed 1,007 in Q1, up 31% year-over-year, and revenue from the top 20 customers averaged $108 million on a trailing twelve-month basis, up 55% year-over-year. Once Palantir gets in the door, customers tend to spend more over time. That’s the kind of dynamic that’s hard to replicate.

Three Ways This Plays Out

• Best case: Q2 revenue beats the $1.8B guide, US commercial sustains triple-digit growth, and the Nvidia partnership produces visible government contract wins. Valuation compression reverses as growth rates justify the multiple.
• Middle ground: Growth moderates toward 60-70% in the back half of 2026, margins hold above 55%, and the stock grinds sideways while the market waits for fiscal 2027 guidance to recalibrate expectations.
• Worst case: Any guidance cut or government budget uncertainty triggers multiple compression from a very high forward earnings multiple. At 80x forward earnings, there is no margin of safety if growth decelerates faster than expected.

Q2 earnings are expected in early August. That’s where investors find out whether the 133% commercial growth from Q1 was a high-water mark or just the beginning.

The business is running at a pace most enterprise software companies will never reach. The debate is about what someone should pay for it today. And right now, the market hasn’t made up its mind.