Palantir's Business Is Booming. So Why Has the Stock Dropped by More Than a Third?

Palantir stock has plunged 37% from its November 2025 peak despite posting 85% revenue growth, a 130% surge in commercial revenue, and 46% operating margins. The disconnect signals a valuation reset, not deteriorating fundamentals, as investors pull back from paying premium multiples for AI-related equities.

The company's P/E ratio sits at 146, still well above broader market averages. That valuation cushion has compressed sharply as enthusiasm for AI stocks cooled and investors repriced growth assumptions. Palantir's commercial segment—which more than doubled year-over-year—continues to drive expansion beyond its government contract base, but the market is no longer rewarding that momentum at the same rate it did in late 2024.

The selloff underscores a familiar dynamic: business performance and stock performance can diverge sharply in the near term, especially for richly valued growth names. Palantir's operational metrics remain robust, but the market's appetite for triple-digit multiples has diminished.