Palantir Technologies (PLTR) took a sharp 12% hit on Tuesday, closing at $108.86, as investors shifted their focus away from blockbuster U.S. government contracts and zeroed in on a soft international showing and sky-high valuation concerns.
Even though the company comfortably beat Wall Street’s revenue expectations overall, its international commercial segment came in light, posting a 5% year-over-year revenue decline to $142 million — well below the $160 million analysts had forecast.
CEO Alex Karp didn’t mince words during the company’s post-earnings call, attributing the weakness to what he sees as a regional lag in embracing artificial intelligence.
“Europe doesn’t get AI yet,” Karp said flatly.
That frank assessment reflects a longer-standing frustration for Palantir. The company has warned investors for over a year that European firms and governments are moving more slowly than their U.S. and Chinese counterparts in adopting AI infrastructure — a trend that continues to weigh on overseas performance.
Global Unease and a Polarizing Brand
Palantir’s share of revenue from Europe has dropped from 16% in Q1 2024 to just 10% in the latest quarter, according to the earnings report. One reason: European buyers are increasingly turning to local AI solutions, seeking greater tech independence amid broader geopolitical tensions.
“It now appears Europe has fallen well behind the US and China, who have invested hundreds of billions in AI infrastructure,” said analyst Gil Luria in an email to Yahoo Finance.
Another possible factor? Palantir’s perceived political alignment. Though CEO Karp has described himself as a centrist — he supported Kamala Harris during her 2024 run — he has also praised Donald Trump and recently voiced admiration for the administration’s aggressive cost-cutting efforts under the newly created Department of Government Efficiency (DOGE).
That image isn’t sitting well with some overseas clients, analysts say. European buyers may be more wary of U.S. tech firms closely associated with controversial political agendas, especially after Palantir’s recent $30 million contract with ICE for immigration surveillance — a deal that drew heavy criticism from human rights advocates and even former employees.
U.S. Government Deals and Soaring Expectations
Despite the overseas headwinds, Palantir’s domestic government business is booming. In March, the company secured a $178 million contract with the U.S. Army to develop AI-powered military trucks — a win that’s emblematic of its deepening ties with Washington.
That, along with soaring investor excitement around Palantir’s AI Platform (AIP) and its first-mover advantage in government AI services, helped propel the stock more than 60% higher in 2025 ahead of this earnings report. Even with Tuesday’s pullback, PLTR is still up more than 45% in the last 30 days.
But the surge has left some analysts questioning valuation. The stock had rocketed well beyond what many see as its intrinsic value, raising fears that much of the good news was already priced in.
“The company’s stock had become disconnected from fundamentals,” one analyst said. “You need both AI narrative and performance abroad — and right now, they’re lacking the latter.”
Looking Ahead
As Palantir continues to scale its government and defense contracts, the key question for investors will be whether it can revive its international momentum and justify its premium valuation.
Karp remains confident, calling Palantir’s work “mission-critical” and asserting that AI’s next big chapter will involve deep integration with government and industrial systems — not just chatbots.
But unless Europe picks up the AI pace — or Palantir finds a way to better localize its offerings — Wall Street may keep scrutinizing the company’s reliance on U.S. deals and its ability to expand globally.
