Shares of Palantir Technologies Inc. declined sharply in after-hours trading Monday following the company's first-quarter earnings report. The data analysis software firm reported results that beat analyst estimates for the quarter, but its sales forecast for the full year fell short of some expectations.
Traders were positioned for a significant move in the stock surrounding the earnings report, with options pricing suggesting volatility of more than 12%. The subsequent price drop pushed shares downward toward levels not seen in weeks.
Despite the immediate market reaction, Palantir described demand for its artificial intelligence software as a "ravenous whirlwind" in a letter to shareholders. The company also raised its full-year revenue forecast from previous guidance, although the new target did not meet the highest projections from Wall Street analysts.
The stock PLTR has been a top performer on the S&P 500 index in recent years, rising significantly in the prior year and continuing its upward trend through the start of the current year before Monday's decline.
Palantir's work includes substantial contracts with the U.S. government, accounting for a large percentage of its revenue. The company is seen as benefiting from growing demand for artificial intelligence services, particularly within defense and government sectors. Some observers believe cost-cutting initiatives could impact government spending, but increased focus on areas like immigration enforcement and military technology are viewed as positive factors.
Strong demand for its AI platform contributed to revenue growth of 30% or more in previous quarters, as noted in the company's February and November earnings reports.
Analysts polled by Visible Alpha expected robust growth in the first quarter, forecasting a 36% increase in revenue and a more than 60% rise in adjusted earnings. Despite the company meeting or exceeding some of these figures, the full-year outlook tempered expectations.
Palantir has cultivated a strong following among individual investors. According to research earlier this year, the company's stock was among the most widely held by retail investors. Surveys suggest many retail holders have shown loyalty, buying shares during price dips.