Shares of Palantir Technologies Inc (NYSE:PLTR) are set to open lower Tuesday, and on the surface, that seems counterintuitive.
The company just delivered a 39% year-on-year revenue jump, a blowout beat on free cash flow, and another bump to full-year guidance. Most firms would kill for numbers like that.
But this is not about performance. This is about expectations.
Palantir has become the AI poster child for tech investors, and its stock has more than doubled this year.
At over 200 times forward earnings, it is also the most expensive name in the Nasdaq 100 on that basis.
Flawless execution
That kind of multiple demands flawless execution, and for many on Wall Street, last quarter’s results, while strong, were not enough to justify the premium.
Wedbush sees things differently. The firm reiterated its 'outperform' rating and raised its 12-month price target to $140 from $120, arguing that Palantir’s core artificial intelligence product, AIP, is scaling faster than expected.
US commercial revenue rose 71% year on year, and now runs at more than $1 billion annually.
Total contract value in that segment surged 183%, while the pipeline of seven- and eight-figure deals is growing. “We view Palantir as a generational tech name,” analyst Dan Ives wrote, “and a core player in the AI revolution.”
Free cash flow for the quarter came in at $370 million, crushing the $254 million consensus estimate.
Adjusted operating margin was 44%, ahead of both company guidance and Wall Street expectations. Customer count rose 39%, and bookings momentum is strong with 139 deals over $1 million closed during the quarter, including 31 worth $10 million or more.
Government business is also re-accelerating. US public sector revenue rose 45%, helped by new awards and deeper adoption across defence and intelligence agencies. The recent partnership with NATO marks an important strategic milestone abroad.
So why the pullback?
Investors were already pricing in near-perfection. And with the stock up 64% year to date, many are now asking whether the future gains have already been baked in.
Wedbush, however, sees more room to run. The firm boosted its 2025 revenue forecast to just under $3.9 billion and now expects free cash flow between $1.6 billion and $1.8 billion. Those are big numbers for a software firm of Palantir’s age, and a sign, in Wedbush’s view, that the business is maturing fast.
In other words, while the broader market cools on Palantir’s valuation, Wedbush is still buying the story.