Earnings season tends to stir excitement on Wall Street and among investors. While market benchmarks fluctuate due to geopolitical influences, economic reports, and overall sentiment, the performance of companies—like the S&P 500—provides a clearer outlook. This direct information can create a sense of optimism or skepticism among investors.
After the market closed on May 4th, Palantir Technologies (NASDAQ:PLTR), known for its data-driven focus on artificial intelligence (AI), is expected to announce its operating results for the first quarter. Many on Wall Street view this report as crucial, especially in light of the competition from major players like Nvidia and Taiwan Semiconductor Manufacturing.
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Palantir tends to overlook the expectations of analysts regarding sales and profits, which raises eyebrows—some might say that this beloved AI firm may have overreached.
Palantir’s headline numbers are likely to shock
Looking back, Palantir has consistently outperformed expectations for earnings per share (EPS) for ten straight quarters. The company has been proactive in increasing its full-year sales projections regularly, which—objectively speaking—looks good.
For the quarter that ended in March, expectations point to revenue of around $1.54 billion, a hefty 74% increase from last year, with EPS around $0.28, which is more than double what it was in the first quarter of 2025.
This growth is largely attributed to Palantir’s Gotham software, a platform driven by AI that aids the U.S. federal government in mission planning and data analysis. Ongoing contracts with the government—and a lack of significant competitors—have helped sustain this growth.
However, this might not be enough when trading starts on May 5th.
Palantir’s evaluation is no longer justified.
While history cannot predict the future, it often offers valuable lessons. Looking at past trends, there is a pattern that suggests companies like Palantir struggle when their price-to-sales (P/S) ratios exceed certain levels.
For three decades, companies leading in innovation have particularly faced challenges with P/S ratios higher than 30. This has raised alarms for investors and indicated unsustainable valuations.
As Palantir approached 2026, its 12-month P/S ratio was above 100—well above what industry leaders maintain. While one would expect the P/S ratio to decrease as revenues grow, even good earnings reports can’t justify a P/S ratio exceeding 70.
Despite a recent 8% rise following past quarterly reports, Palantir’s stock experienced a drop of up to 12% at times. As fluctuations tend to be common after Palantir’s earnings announcements, braces for some volatility on May 5th seems prudent.
Should you buy Palantir Technologies stock now?
If considering an investment in Palantir Technologies, here are a few things to weigh:
According to our analysts, the Motley Fool Stock Advisor has identified what they feel are the 10 best stocks to invest in currently, and curiously, Palantir Technologies isn’t among them. These stocks are seen as having considerable potential for the upcoming years.
For reference, consider the historical performance of stocks like Netflix and Nvidia, which have shown impressive gains since their inclusion in the advisor’s recommendations.
It’s interesting to note that Stock Advisor reports an average return of 983%, while the performance of the S&P 500 stands at around 200%—that’s quite a notable difference.
*Stock Advisor will return on April 28, 2026.
sean williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Palantir Technologies, and Taiwan Semiconductor Manufacturing.
Prediction: Palantir stock will plummet on May 5th Originally published by The Motley Fool
