Palantir (PLTR) stock fell 13% Tuesday afternoon as investors scrutinized the company’s valuation and declining sales in its international business, even as its first quarter revenue blew past Wall Street’s forecasts.
Palantir’s first quarter revenue in its international commercial segment, which sells software to businesses abroad, posted a 5% decline in the first quarter from the prior year. The segment’s $142 million in revenue was below the $160 million expected by Wall Street analysts.
Europe has declined as a share of Palantir’s revenue from 16% in the first quarter of 2024 to 10% in its most recent quarter.
“Europe doesn’t get AI yet,” CEO Alex Karp said on the company’s post-earnings conference call.
Since 2023, Palantir executives have noted difficulties in that market, as the region has been slower to make large-scale investments in AI and faces slowing GDP growth.
“We saw some early signs of investment in AI in Europe, but it now appears Europe has fallen well behind the US and China who have invested hundreds of billions in AI infrastructure,” Gil Luria told Yahoo Finance in an email Tuesday.
European businesses have increasingly looked to spend money on homegrown AI tech firms as they seek tech “sovereignty” from the US. Additionally, Luria said that Palantir’s “alignment with the Trump administration may be an issue for some European buyers.”
Palantir has benefited from the Trump administration’s controversial immigration agenda. It was recently awarded a $30 million contract with ICE to surveil immigrants, prompting concerns over potential rights violations and backlash from former employees. The company was also awarded a $178 million contract by the US Army in March to develop AI military trucks.
While he supported Kamala Harris during last year’s presidential race, Karp has called Trump “brilliant” and applauded his cost-cutting agenda via the newly created Department of Government Efficiency (DOGE).
Palantir stock was up over 60% this year ahead of Monday’s earnings results. Even with Tuesday’s drop, the stock had gained over 45% in the past month alone.
Overall, Palantir’s first quarter earnings surpassed analyst expectations. Palantir’s revenue of $884 million for the March period was ahead of the $863 million expected by Wall Street analysts, driven by a 71% jump in its US commercial business — which sells its AI-fueled data analytics software to companies such as Citi, Hertz, and BP — and a 45% climb in the company’s revenue from US government contracts.
