Palantir shareholders have had a rough run as the shares have lost more than 40% from their November peak, turning what was once a high-flying stock into a major disappointment for many investors. The selloff has created a much more negative mood around the company.
Now, the company has a big chance to change that story. Palantir is set to report its second-quarter earnings after the market closes on Monday. Strong results could help stop the stock’s decline, but Wall Street investors are not confident that even a strong quarter will be enough.
Palantir earnings expectations are high
Investors are expecting very strong numbers already. Palantir is projected to report a 143% jump in net income for the second quarter, while revenue is expected to rise 80% from a year earlier. Free cash flow, which is becoming an important measure for AI companies, is expected to double to about $1 billion, according to Bloomberg.
The problem is that the market already expects Palantir to deliver a huge quarter. Because expectations are so high, simply beating estimates may not be enough to push the stock higher. Investors also want strong future guidance from the company.
Palantir stock needs strong results
Luke Rahbari, CEO of Equity Armor Investments, said Palantir needs to have an exceptional quarter to keep the stock stable. His firm owns Palantir shares. Rahbari questioned how strong the company’s results would need to be to bring back the excitement that once surrounded the stock.
Rahbari also said sentiment around Palantir has become very negative. He said the company would need to “really charm” investors before he would consider adding to his position. He believes Palantir must hit its numbers and provide very strong guidance, according to Blomberg.
Palantir valuation stays expensive
Palantir’s valuation is at the center of the debate. The stock has become much cheaper compared with its previous peak. Shares are now trading at around 67 times expected earnings over the next 12 months, down sharply from 247 times on October 31.
Even after that huge drop in valuation, Palantir is still far from cheap. Its forward price-to-earnings ratio is below its five-year average of 98, but the company remains one of the 15 most expensive stocks in the S&P 500.
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Palantir looks even more expensive when sales are considered. Based on the price-to-sales ratio, Palantir is currently the most expensive stock in the S&P 500, Bloomberg reported. That creates a difficult situation for investors. The stock is cheaper than it was during its peak, but it is still priced at a very high level. This means investors want strong earnings growth to justify the premium valuation.
Wall Street is split on Palantir
Mark Luschini, chief investment strategist at Janney Montgomery Scott, said investors are stuck in a “damned-if-you-do, damned-if-you-don’t” situation, according to Bloomberg. Janney owns Palantir shares. Luschini said a disappointing earnings report could cause the stock to fall sharply. But even good results could create a problem. Luschini said he is not sure strong earnings would be enough to change the negative mood around Palantir. This means the company could beat expectations and still see limited gains in its stock.
There are still plenty of Palantir bulls on Wall Street. Out of 33 analysts tracked by Bloomberg, 22 currently have a buy rating on the stock. Analysts also see significant upside. The average Wall Street price target is around $189, which suggests the stock could gain more than 50% over the next 12 months, according to Bloomberg.
Palantir AI growth supports stock
Daniel Morgan of Synovus Trust remains positive about the business. Morgan, who owns Palantir shares personally and through his professional portfolio, said the company looks “pretty solid” heading into earnings. Morgan’s biggest concern is still Palantir’s valuation. He described the stock’s valuation as “superhuman,” meaning investors are paying an extremely high price for the company’s growth.
However, Morgan believes the premium could have a reason. He pointed to Palantir’s strong sales growth, which is significantly higher than the growth of the broader S&P 500.
Palantir’s free cash flow is another positive factor. Morgan said the company’s ability to generate strong free cash flow helps support the high valuation, especially as investors increasingly focus on whether AI companies can turn growth into actual cash.
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The stock’s recent underperformance could also make the risk-reward picture better. Citi analyst Tyler Radke said Palantir’s weaker performance compared with the iShares Expanded Tech-Software Sector ETF (IGV) makes the stock’s risk-reward balance more attractive.
Palantir faces political risks
Radke’s checks during the quarter were positive. He said his checks showed positive signs across both Palantir’s commercial business and federal government business, according to a June 23 note to clients. But Palantir also faces political risks.
The company could face investigations over its relationship with the Trump administration if Democrats take control of one or both chambers of Congress in the November midterm elections. The company also faces pressure outside the US. European politicians and military officials could push to remove Palantir’s software from their systems because of concerns about the company’s data practices and its close relationship with Trump.
Palantir’s heavy dependence on the US market reduces some of that concern for Morgan. The US generated about 74% of Palantir’s revenue in 2025, meaning the company is much less dependent on European markets such as the UK and France. That is why Morgan is not overly worried about a European backlash. He believes Palantir’s large US business gives the company some protection if European governments become more critical of its technology or political ties.
Palantir stock faces a key test
The broader technology market is giving Palantir some support heading into earnings. Technology companies have generally reported strong results this quarter, while software and technology-services companies have often beaten expectations.
Mega-cap technology companies have also been performing well in earnings. That creates a positive setup for Palantir as investors prepare for its report. Still, the key question is not whether Palantir can post strong numbers. The bigger question is whether those numbers will be strong enough to change investor sentiment and push the stock higher.
Palantir has become a “show-me” stock. Rahbari said investors now want the company to prove that its growth can continue rather than simply relying on its past success. Future guidance could ultimately decide the stock’s reaction. If Palantir delivers strong earnings but warns that growth could become uncertain, investors may remain disappointed.
The earnings report therefore carries unusually high pressure. Palantir needs to deliver strong financial results, maintain its rapid growth, provide confident guidance and convince investors that its premium valuation is justified. Otherwise, even a good quarter may not be enough to stop the stock’s decline.
