Palantir's stock price dropped by 6%, but its revenue hit a record high.

Palantir shares fell by more than 6% in after-hours trading on Tuesday. Despite the fact that it achieved record revenue over a quarter, the data analytics giant Palantir found itself in this situation.

The company, which also provides software solutions for the defense sector, reported third-quarter sales of $1.18 billion, with a net profit of $475.6 million. Both figures were above estimates.

CEO Alex Karp shared in a published letter that the company “generated more profit in a quarter than it ever has before.” The Denver-based company announced that it expects to see sales above estimates for the current quarter, thanks to a surge in artificial intelligence (AI) adoption. Additionally, it obtained increasing government contracts, including agreements worth $500 million with the Internal Revenue Service and the Department of State.

Palantir has gained more than 175% this year, reflecting the high valuations created by the AI craze in the market. However, some analysts pointed out that Palantir's market value of $491.3 billion is high.

Analysts noted in a report from Jefferies that while Palantir's numbers are “great,” the “valuation is excessive.” “We admire the fundamentals and the numbers speak for themselves, but we find the 83 times risk/reward ratio in the 2026 revenue estimates to be unfavorable and prefer to gain exposure to AI in other ways.”

On the other hand, Palantir's direction is supported by some analysts. Morgan Stanley analysts Sanjit Singh and Keith Weiss emphasized that Palantir's momentum shows “no signs of slowing down.” They pointed out the rapidly occurring revenue growth guidance.

Karp stated during a call with investors that concerns came from “highly educated” elites. “What I see in these numbers, and what they tell us, simply put, is yes, we were right, you were wrong, and we need to deeply question our correctness because this is exceptionally good for America.”