Palantir (PLTR) Analysis: 17% Pullback from Peak Amid Strong Earnings vs Valuation Concerns

This analysis is based on the Reddit discussion [1] published on November 7, 2025, which highlighted that Palantir Technologies (PLTR) had fallen approximately 17% from its all-time high despite beating earnings and showing strong AI/data-analytics growth. The stock’s decline to $172.27 (-1.59% on November 7, 2025) [0] reflects a complex interplay between exceptional fundamental performance and mounting valuation concerns, amplified by high-profile bearish positioning from Michael Burry and insider selling patterns.

Palantir delivered what analysts described as “one of the best quarters ever seen” [2], with exceptional Q3 2025 metrics:

• Revenue Growth
  : 63% YoY to $1.18 billion (beat consensus of $1.09 billion) [2]
• U.S. Revenue
  : Jumped 77% to $883 million, driven by 121% growth in U.S. commercial sales [2]
• GAAP EPS
  : Tripled from $0.06 to $0.18 [2]
• Contract Value
  : Total contract value closed jumped 151% YoY to $2.76 billion [2]
• Guidance Raised
  : 2025 revenue guidance increased to $4.396-$4.4 billion [2]

Despite these strong fundamentals, the stock initially rose on earnings news but slid during the earnings call, despite no apparent negative commentary from management [2]. This suggests the market reaction was driven more by valuation concerns than fundamental disappointments.

The primary concern centers on Palantir’s extreme valuation metrics:

• Forward P/S Ratio
  : 110x based on updated 2025 revenue guidance [2]
• P/E Ratio
  : 391.52x (current) to 369.10x (company overview) [0]
• Market Cap
  : $393.52 billion [0]
• Analyst Assessment
  : Stock described as “overstretched” trading above 200x forward earnings [1]

These valuation levels are historically unsustainable and create significant vulnerability to multiple compression, particularly in volatile market conditions.

The situation is complicated by Michael Burry’s significant bearish stance:

• Position
  : Put options on 5 million Palantir shares [2]
• Notional Value
  : Approximately $900 million if fully converted [3]
• Strategy
  : Part of broader bearish bets against AI stocks including Nvidia [3]
• Rationale
  : Believes AI stocks are in a bubble and overvalued [3]

Burry’s position, given his track record of predicting major market dislocations, adds credibility to valuation concerns and may influence other institutional investors.

The tech sector has been under pressure recently, with NASDAQ down 1.74% on November 6, 2025, and -0.49% on November 7, 2025 [0]. Palantir and AMD were noted as leaders in a tech selloff that pushed NASDAQ to two-week lows [1], indicating that sector-wide pressures are amplifying company-specific concerns.

The most striking insight is the acceleration in Palantir’s growth trajectory - from 46% YoY in Q2 to 63% YoY in Q3 [2]. However, questions remain about the sustainability of such explosive growth rates, particularly as the company scales and faces increased competition in the AI analytics space.

Recent insider activity adds another layer of concern:

• Alex Moore
  (director and early employee): Sold approximately $4.1 million worth of shares (~23,000 shares) [1]
• Pattern
  : Insiders at Palantir and Nvidia have collectively dumped close to $9.3 billion of their own company stock since November 2023 [1]
• Context
  : Most insider selling appears to be pre-planned 10b5-1 trades rather than reactive to recent price action [1]

While much of this selling may be routine, the sheer magnitude suggests that those closest to the companies recognize valuation risks.

Palantir’s heavy reliance on U.S. government contracts ($486 million in Q3 sales) [2] creates both stability and concentration risk. The 121% growth in U.S. commercial sales [2] is encouraging for diversification, but the government-heavy revenue mix remains vulnerable to policy changes and budget constraints.

1. Extreme Valuation Risk
   : At 110x forward sales and 391x P/E, the stock is vulnerable to multiple compression [0][2]
2. Concentration Risk
   : Heavy reliance on government contracts creates policy and budget sensitivity [2]
3. Bubble Dynamics
   : AI sector enthusiasm may be creating unsustainable pricing dynamics [3]
4. Insider Sentiment
   : Pattern of insider selling suggests valuation concerns [1]

Despite the risks, several factors support a bullish long-term thesis:

1. Market Leadership
   : Strong position in AI and data analytics with accelerating growth [2]
2. Pipeline Strength
   : 151% YoY growth in contract value indicates robust future revenue potential [2]
3. Profitability
   : 52.4% adjusted operating margin expected [2]
4. Analyst Optimism
   : Wedbush’s Dan Ives projects $1 trillion market cap within 3 years [1]

1. Q4 2025 Results
   : Whether 60.5% growth guidance can be met [2]
2. Commercial vs. Government Mix
   : Progress in diversifying revenue sources [2]
3. Competitive Developments
   : Emerging threats from other AI platforms
4. Macroeconomic Indicators
   : Recession risks that could impact commercial AI spending
5. Institutional Flow Changes
   : Whether Burry’s short position influences other institutional investors

The 17% pullback from Palantir’s all-time high represents a classic divergence between strong fundamental performance and extreme valuation concerns. The company’s exceptional Q3 2025 results, with 63% YoY revenue growth and accelerating U.S. commercial sales, demonstrate strong business execution [2]. However, the stock’s valuation at 110x forward sales and 391x P/E creates significant downside risk if growth rates moderate or market conditions deteriorate [0][2].

Michael Burry’s $900 million short position [3] and ongoing insider selling patterns [1] add credibility to valuation concerns, though much insider activity appears to be pre-planned. The broader tech sector weakness [0] amplifies these company-specific issues.

For long-term investors, the key question becomes whether Palantir can sustain its current growth trajectory long enough to justify current valuations. The company’s strong pipeline, market leadership position, and expanding commercial business provide support for the bull case, while valuation extremes, concentration risks, and potential AI bubble dynamics present significant challenges [1][2][3].

• Sustainability of 63% YoY revenue growth rates
• Competitive landscape evolution in AI analytics
• Impact of potential recession on commercial AI spending
• Customer concentration risk assessment
• Long-term margin sustainability at scale