New York, Feb 4, 2026, 16:06 EST — After-hours
- Palantir shares fell Wednesday, deepening a sharp pullback following a brief surge on earnings news.
- Investors held back across software, with options flows shifting toward a defensive stance.
- Palantir’s 2026 outlook has become the latest rallying point for bulls, yet the debate over its valuation has resurfaced.
Shares of Palantir Technologies Inc. dropped 13.6%, ending Wednesday at $136.46. The stock fluctuated from a high of $155.85 to a low of $135.75 amid a wider selloff in software stocks. 1
The decline hit despite upbeat earnings and guidance earlier this week, as bargain hunters steered clear of beaten-down software stocks. “Our customers have not been as eager to buy dips in software,” said Steve Sosnick, chief strategist at Interactive Brokers. Meanwhile, Chris Murphy from Susquehanna noted that options flow “remains overwhelmingly defensive” in software-linked ETFs. 2
Why it matters now: Palantir is acting like a high-beta gauge for whether corporate and government clients are converting AI software trials into actual spending. A reversal this sharp in a single day, right after earnings, typically signals the market is raising its standards.
The day before, Palantir’s shares surged 6.9%, driven by a strong quarterly sales beat and a forecast buoyed by increasing U.S. defense budgets. Morningstar analysts highlighted “political tailwinds for reindustrialization,” though Jefferies cautioned that Palantir must continue delivering results to support its valuation. 3
Palantir reported a 70% jump in fourth-quarter revenue to $1.407 billion in its Feb. 2 SEC filing. U.S. commercial sales surged 137% to $507 million, while U.S. government revenue rose 66% to $570 million. Looking ahead, the company projected 2026 revenue between $7.182 billion and $7.198 billion, with adjusted free cash flow forecasted from $3.925 billion to $4.125 billion. CEO Alex Karp described Palantir as “an n of 1.” 4
U.S. stocks closed down Wednesday, dragged lower by worries over expensive AI-related shares. Palantir’s drop weighed on sentiment after its sharp rally a day earlier. “The market is suddenly skeptical and concerned about it,” noted Jed Ellerbroek, portfolio manager at Argent Capital. GuideStone’s Josh Chastant added he’s “a bit bearish on software in general” due to disruption risks. 5
Palantir faces headline risk that investors often overlook during strong market days. On Feb. 2, Reuters covered CEO Karp defending the company’s surveillance tech, emphasizing built-in safeguards against government overreach amid rising scrutiny of firms linked to U.S. immigration enforcement. “Valuation question marks won’t disappear,” noted eToro analyst Zavier Wong. 6
Wednesday’s sell-off highlights just how fast “good numbers” can be overshadowed when a crowded trade reverses. Palantir delivered bold guidance, but traders are questioning if demand will hold up after early adopters complete their initial rollouts and procurement slows down.
Another wildcard is the mix. While Palantir’s U.S. commercial growth grabs most of the attention, government contracts still make up a sizable chunk of revenue—and their timing can be uneven, causing bumps when contracts shift.
Heading into Thursday’s session (Feb. 5), investors will be watching closely to see if the software sell-off deepens and whether Palantir can maintain its post-earnings support after bouncing around for two days.
