New York, Feb 5, 2026, 10:31 EST — Regular session
- Palantir shares dropped roughly 7% in morning trading, deepening their recent sell-off
- Since the results, the stock has swung sharply as investors rethink valuations of expensive AI-linked software firms
- Next week’s U.S. data could upend rate expectations for growth stocks, traders say
Palantir Technologies Inc. shares dropped roughly 6.8% to $130.11 in Thursday morning trading, continuing the volatile retreat following the data-analytics firm’s earnings-fueled rally earlier this week.
The decline comes after a nearly 12% plunge on Wednesday that wiped out most of Tuesday’s gains, amid a wider tech selloff driven by concerns over valuations and the impact of the AI surge on legacy software models. “The market is having a really hard knowing where to price the stocks and what the future looks like,” said Jed Ellerbroek, a portfolio manager at Argent Capital. Reuters
Palantir’s sharp turnaround highlights just how tight the leash is on high-multiple stocks these days, even after they beat estimates. The spotlight shifts away from the recent quarter and onto what the coming weeks will reveal.
Palantir reported Q4 revenue of $1.407 billion on Monday, a 70% jump from the same period last year. U.S. commercial revenue soared 137% to $507 million, while U.S. government revenue rose 66% to $570 million. The company projects full-year 2026 revenue between $7.182 billion and $7.198 billion, with adjusted free cash flow forecasted at $3.925 billion to $4.125 billion. It also announced closing a record $4.262 billion in total contract value during the quarter.
The stock’s valuation remains front and center. On Tuesday, Reuters noted shares were trading at a forward price-to-earnings ratio near 131—a figure based on projected profits for the next year. Jefferies analysts cautioned that Palantir must keep hitting its targets to justify that lofty multiple. Meanwhile, CEO Alex Karp stood by the company’s surveillance activities despite growing criticism tied to clients connected with U.S. Immigration and Customs Enforcement contracts.
Thursday’s action comes as U.S. software shares attempt to find footing following a tough stretch, amid investor doubts about whether rapidly evolving AI technologies will chip away at pricing power throughout the sector. “At the moment, we have not suggested people to buy software for that reason,” said Manish Kabra, lead U.S. equities and multi-asset strategist at Societe Generale. Reuters
Separately, Palantir director Alexander D. Moore disclosed selling 20,000 Class A shares on Feb. 2. The trades were executed under a Rule 10b5-1 trading plan, per a Form 4 filing.
The bigger threat for shareholders is straightforward: with stocks priced for lofty expectations, even solid growth might fall short. If government demand dips, commercial contracts falter, or rivals gain ground, a minor pullback could escalate quickly.
Rate-sensitive growth stocks face their next challenge as U.S. economic data rolls out. The Employment Situation report for January is due Feb. 11, followed by the January Consumer Price Index on Feb. 13. These numbers often trigger swift market moves in interest rate expectations, directly impacting high-valuation tech shares.
