Palantir Overpriced and Overexposed: PLTR Stock Breaks Support as Investors Lose Faith
As investor euphoria waned and worries about Palantir Technologies' excessive reliance on U.S. government contracts and exorbitant valuation
Quick overview
- Palantir Technologies' stock fell nearly 3% midweek due to concerns over its heavy reliance on U.S. government contracts and high valuation despite strong earnings.
- The company's revenue is significantly dependent on government contracts, which poses risks amid potential federal spending changes.
- Palantir's forward price-to-earnings ratio is around 465x, raising skepticism about its ability to sustain future growth at current price levels.
- Investor sentiment worsened after Michael Burry disclosed a short position against Palantir, highlighting fears that the stock's rally was driven more by hype than fundamentals.
As investor euphoria waned and worries about Palantir Technologies’ excessive reliance on U.S. government contracts and exorbitant valuation overshadowed its impressive results announcement, the company’s stock decline deepened midweek.
PLTR Loses Shine
Palantir Technologies (NYSE: PLTR) saw its shares slide nearly 3% on Wednesday, falling from $190.70 to intraday lows near $185, after briefly dipping as far as $182 earlier in the session. The renewed weakness reflects mounting investor anxiety over the company’s limited revenue diversification — a vulnerability that has become increasingly apparent following its third-quarter results.
While Palantir delivered record earnings growth, the market has shifted its focus to sustainability. Over half of the company’s total revenue comes from its U.S. government business, making it heavily exposed to any changes in federal spending, especially amid uncertainty caused by the ongoing government shutdown.
Valuation Stretched to Breaking Point
Beyond its dependence on Washington contracts, Palantir’s towering valuation is drawing skepticism. Trading at a forward price-to-earnings (P/E) ratio near 465x, the stock is now one of the most expensive names in the entire S&P 500, fueling doubts about whether future growth can justify the current price levels.
Investors have responded by scaling back exposure, with heavy selling pressure pushing PLTR toward its 50-day simple moving average (SMA) — a level that has acted as a critical technical support in recent months.
PLTR Chart Daily – The 50 SMA Has Been Broken
If the stock closes decisively below this line, chart watchers see a potential drop toward the $150–155 zone, a key support area highlighted by longer-dated options positioning.
Palantir Q3 2025 Earnings Snapshot
- Earnings per share (adjusted): $0.21 vs. $0.17 expected
- Revenue: $1.18 billion vs. $1.09 billion expected
Q3 Revenue
- Total revenue surged 63% year-over-year, climbing from $725.5 million to $1.18 billion.
- This marks the second consecutive quarter exceeding $1 billion in revenue, signaling sustained growth in demand for Palantir’s AI-driven data platforms.
- Net income more than tripled to $475.6 million (18 cents/share) from $143.5 million (6 cents/share) last year.
Government Business Dependency
- U.S. government revenue grew 52% to $486 million, reaffirming Palantir’s position as a critical AI and analytics provider to federal agencies.
- Strong defense and intelligence contracts continue to underpin the company’s predictable growth base.
- Commercial Business Momentum
- U.S. commercial revenue more than doubled to $397 million, reflecting rapid enterprise adoption of Palantir’s AI tools.
- Total contract value for U.S. commercial deals quadrupled to $1.31 billion, supported by expanding corporate partnerships.
- Recent collaborations include Snowflake, Lumen, and Nvidia, deepening Palantir’s integration into the broader AI ecosystem.
Outlook
- Q4 revenue guidance: ~$1.33 billion, well above analyst expectations of $1.19 billion.
- Full-year 2025 revenue forecast: Raised to ~$4.4 billion, exceeding Wall Street’s $4.17 billion estimate.
- Free cash flow guidance: Increased to $1.9–$2.1 billion, reflecting stronger operational efficiency and growing margins.
Bearish Bets Add Fuel to the Fire
Sentiment worsened after renowned investor Michael Burry, famed for his prescient “Big Short” trade, disclosed a short position against Palantir in his latest portfolio filings. The revelation added momentum to the bearish narrative already swirling around the stock, reinforcing fears that Palantir’s rally was built more on hype than substance.
Even though management reaffirmed upbeat guidance for the next quarter, investors appear unconvinced. The combination of a potential government shutdown extending into its second month, rising geopolitical tensions, and inflated valuations has overshadowed any optimism from the company’s outlook.
Conclusion: From Market Darling to Cautionary Tale
Palantir’s latest selloff underscores how fragile investor confidence has become. Despite delivering robust earnings and ambitious guidance, the company’s reliance on government contracts, lack of diversification, and extreme valuation have made it an increasingly risky bet.
Unless Palantir can demonstrate sustained commercial growth outside the public sector and justify its premium pricing, the stock’s recent weakness may only be the beginning of a longer correction.
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