Analyst downgrades Palantir stock as it pops on Q1 earnings

Palantir Technologies (NASDAQ: PLTR) is inching up in extended hours after reporting a market-beating Q1 and significantly raising guidance for the full year.

The AI-enabled data analytics firm posted adjusted earnings of 33 cents per share on $1.63 billion in revenue – comfortably clearing 28 cents a share and $1.54 billion that analysts expected.

Despite the post-earnings pop, Palantir stock remains an underperformer for 2026, currently down some 17% versus its year-to-date high as the broader software sector grapples with valuation resets amidst fears of AI disruption.

Why Palantir stock is in ‘green’ after Q1 earnings

PLTR shares are extending gains on Q1 earnings primarily because the release signals a company firing on all cylinders within the US market.

The firm’s domestic revenue more than doubled year-on-year to $1.28 billion – fuelled by an 84% increase in government sales. In his letter to shareholders, CEO Alex Karp said:

“Our financial results now demonstrate a level of strength that dwarfs the performance of every software company in history at this scale.”

Karp also attempted to silence AI disruption fears, emphasizing PLTR is carving a unique path away from the “intensely competitive race” of AI model developers, instead building a “juggernaut of a business” focused on delivering “lethal capabilities” and real-world results to its partners.

HSBC analyst turns his back on PLTR shares

Despite Karp’s reassurance, HSBC’s analyst Stephen Bersey isn’t entirely convinced.

In a research note dated May 4^th, Bersey downgraded Palantir shares to “neutral” and trimmed his price target to $151, indicating essentially no further upside from current levels.

According to him, PLTR’s traditional “moat” – embedding engineers within client organizations – is under threat as AI rivals like Anthropic and OpenAI adopt similar hands-on integration strategies.

The note highlighted that “traditional barriers to entry have begun to erode” due to rapid adoption of agentic frameworks, increasing the “risk of multiple compression” as the market realizes Palantir is no longer the only game in town for complex AI orchestration.

How to play Palantir after its first-quarter earnings

Looking ahead, Palantir’s executives are doubling down on its aggressive growth trajectory – raising its 2026 revenue guidance to a range of $7.65 billion to $7.66 billion, a 71% increase that sits well above the $7.27 billion consensus.

The company also boosted its adjusted free cash flow forecast to $4.2 billion – $4.4 billion.

While Karp remains ultra-bullish, telling CNBC he expects the US business to “double again in 2027,” the market remains divided.

With a nosebleed price-to-earnings (P/E) multiple of about 130x and emerging competition in the “AI orchestration” space, the central question for investors is whether PLTR’s “uniquely American” artificial intelligence revolution can maintain its premium valuation as the SaaSpocalypse continues to claim victims across the broader software space.

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