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Palantir Technologies Inc. (PLTR) stock fell more than 8% in Tuesday's premarket trading despite stronger-than-expected third-quarter earnings and an upbeat outlook.
Investors focused on slowing contract growth and the company's steep valuation, raising questions about whether its AI-driven momentum can continue.
The decline came as Nasdaq futures gained 0.39%, while S&P 500 futures slipped 0.05%.
Palantir reported third-quarter revenue of $2.31 billion, beating Wall Street's $2.18 billion estimate. Adjusted earnings of 44 cents per share also topped the 41-cent consensus.
The company forecast fourth-quarter revenue of $2.649 billion to $2.653 billion, above the $2.46 billion estimate.
Palantir also raised its full-year 2026 revenue forecast to $8.53 billion to $8.534 billion from $8.15 billion to $8.16 billion.
However, total contract value growth slowed to 6% from 49% in the previous quarter. U.S. commercial contract value growth also cooled to 11% from 153%.
The slowdown raised concerns about future revenue growth, particularly as Palantir's premium valuation leaves little room for disappointment.
Ahead of earnings, JPMorgan analyst Brian Essex initiated coverage with an Overweight rating and a December 2027 price forecast of $262.
Essex said businesses are moving beyond AI experiments and seeking measurable returns on their investments.
He also highlighted growing demand for AI sovereignty as companies and governments seek greater control over their data and security.
The analyst expects Palantir's free cash flow to grow about 77% annually through 2028.
Following the results, Rosenblatt Securities analyst John McPeake maintained his bullish outlook, highlighting Palantir's accelerating U.S. commercial revenue growth.
McPeake told CNBC that U.S. commercial revenue jumped 148% year over year.
He argued that investors should focus on earnings and free cash flow rather than Palantir's elevated sales multiple.
McPeake, who previously raised his price forecast to $260, said Palantir generates roughly half of its revenue as free cash flow.
He also highlighted the company's ability to integrate business data and deploy different AI models while managing privacy and costs.
CEO Alex Karp emphasized the importance of maintaining U.S. technological leadership amid China's rapid AI advances.
Karp said Palantir's defense technology could improve military effectiveness and strengthen deterrence.
He also called for closer cooperation with U.S. allies on AI development and deployment.
Palantir remains under near-term selling pressure. At $163.80, the stock trades below its 20-day simple moving average of $196.69 and 50-day average of $186.87.
However, it remains above its 100-day average of $162.90 and 200-day average of $153.57, suggesting its longer-term trend has not fully broken down.
The MACD remains below its signal line, signaling weakening momentum. Meanwhile, September's golden cross continues to support the longer-term bullish outlook.
Traders are watching resistance near $194.50 and support around $164.50. A sustained break below support could increase selling pressure.
PLTR Stock Price Activity: Palantir Technologies shares fell 8.15% to $163.80 in Tuesday's premarket trading, according to market data.
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