For the first time in two years,

Palantir Technologies Inc.

shares are not rallying into a

quarterly earnings report

— a signal that investors are finding fewer reasons to snap up what has become one of the most expensive stocks

in the S&P 500 Index

.

Shares of the

software company

have tumbled roughly 29 per cent from their November peak, reached right before Palantir last reported results, and are down more than 15 per cent to start 2026, putting them among the 15 worst performers in the S&P 500 this year. While the selloff has

cut into Palantir’s valuation

, shares still trade for about 142 times expected earnings, the third-highest multiple in the S&P 500.

Despite its hefty price tag

, Wall Street expects Palantir to report another quarter of solid growth. Analysts covering the firm estimate adjusted earnings per share will increase 63 per cent to 23 cents in the final quarter of 2025. Revenue is expected to be US$1.3 billion, a 61 per cent jump from the same period a year ago.

“Investors are looking for ‘show me’ results and valuation — attractive investments, basically,” said Mark Giarelli at Morningstar Investment Service, who has a sell rating and US$135 price target on Palantir shares. Palantir stock gained as much as 3.3 per cent in intraday trading Monday.

Palantir’s earnings come amid mounting skepticism about

Big Tech

, with investors demanding to see returns on high spending on

artificial intelligence infrastructure

. That sentiment has weighed on tech shares as traders shift their focus from the earliest winners of the AI trend to companies set to benefit from the billions of dollars pledged by hyperscalers like Amazon.com Inc., Alphabet Inc. and Microsoft Corp. Firms seen as being hurt by AI, including software stocks, are also seeing shares dragged lower.

All of this puts pressure on Palantir to deliver forward guidance that beats expectations, proving that it deserves its premium price. However, the valuation being down from its late October peak also could be seen as a healthy sign for the stock, according to Que Nguyen, chief investment officer at Research Affiliates.

“This is a comforting reflection that it is growing into investor expectations, and that investors are not ratcheting up hopes in a too irrational way,” Nguyen said in an email.

The stock’s recent selloff could lend it some upside. It’s nearing oversold territory after falling below its 50-, 100- and 200-day moving averages, key technical levels.

“There are some smaller pockets of support down there,” said Jake Behan, head of capital markets at Direxion.

High Bar to Clear

Palantir’s earnings report Monday after the market close will dictate the direction of shares.

There’s “no reason to think Palantir won’t have another great quarter,” said DA Davidson’s Gil Luria. “Nothing that has transpired this quarter would change that. Having said that, they have set the bar so high in terms of expectations and the last few quarters have been so impressive, that they have a tough bar to clear.”

Growth in a few key areas in the company’s upcoming results could reignite the 135 per cent rally Palantir saw last year.

Government contracts make up more than half of Palantir’s revenue, and that segment is expected to increase by more than 50 per cent in the quarter from a year ago. Investors have been particularly interested in Palantir expanding its commercial base; analysts anticipate that revenue in the US segment will be nearly US$650 million in the fourth quarter, up more than 70 per cent from a year ago.

Of course, even with bullish commentary from the company, investors may still be reticent to buy Palantir given the soured mood on software stocks. Shares of Microsoft and ServiceNow Inc. slumped after their own results, weighing on the broader market Thursday.

“To avoid the knee-jerk reaction that ServiceNow or Microsoft has seen, it might need to be a beat and guidance that is in-line or better than expected,” said Joe Tigay, portfolio manager at Equity Armor Investments, which holds Palantir shares.

If Palantir provides a conservative outlook, the Street won’t run the stock higher, Tigay added.

One potential catalyst for shares during the earnings release could be remarks from Palantir chief executive Alex Karp, said Direxion’s Behan.

“He’s well known to bust out the pompoms for his company,” Behan said. “Frankly I’d be shocked if he can’t rally some buyers no matter what the report shows.”

    —With assistance from Brody Ford, Se Young Lee, Subrat Patnaik and David Watkins.

    Bloomberg.com

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