Palantir Stock Pauses After 2025 Surge as 2026 Begins

Rotation weighs on high-fliers

On January 2, 2026, software stocks broadly came under pressure while semiconductor shares advanced. Palantir felt the impact of this sector rotation.

Several factors converged to push the stock lower:

• Profit-taking: Following a 138% rally in 2025, investors are realizing gains, with some deliberately pulling the trigger early in the year to defer taxes.
• Sector rotation: Capital shifted from software into semiconductors, a dynamic that tends to hurt richly valued software names like Palantir.
• Valuation concerns: The stock trades at a forward P/E of over 200 and a forward price-to-sales ratio of around 100, rating the shares well above typical software-sector multiples. The market appears to be pricing in roughly a 2,900% premium versus the industry median on the forward basis.
• Market backdrop: Softness around Tesla, after tepid Q4 delivery numbers, may have added to the cautious mood, partly due to linkages between Palantir’s founders Peter Thiel and Elon Musk.

valuation in focus

Valuation remains the central sticking point. The forward P/E is stated to be above 200, far beyond the sector’s normal range, and the forward P/S sits near 100. This translates into an eye-popping premium when looking at expected revenue.

Analysts are divided. The consensus rating is “Hold,” comprising 11 Neutral, 3 Buy, and 2 Sell recommendations. The average 12-month price target sits at $187.87, implying about 12% upside from current levels.

Strong growth, but momentum may be tempering

The company’s operating trajectory remains dynamic. In the third quarter of 2025, revenue rose 63% year over year, with the US commercial segment expanding 121%. In that quarter, more than 200 contracts were signed, each with a value exceeding $1 million.

Looking ahead, projections point to a gradual slowdown in growth:

Should investors sell immediately? Or is it worth buying Palantir?

• 2025 revenue growth: about 54%
• 2026 revenue growth: about 45%
• 2027 revenue growth: about 37%

At the same time, profitability is expected to rise. On an adjusted basis, operating margins could approach 50% by fiscal year 2027.

AI euphoria under scrutiny

The broader AI investment wave is increasingly scrutinized. A Motley Fool survey found that 90% of respondents plan to buy or hold AI stocks in 2026, yet concerns over valuations remain among the top worries.

Palantir appears particularly sensitive to sentiment shifts in this space. Since the release of Q3 results in November 2025, the stock has fallen about 19% despite strong fundamentals, highlighting the market’s emphasis on valuation levels.

Technical picture darkens

From a chart perspective, Palantir has struggled to sustain a run above the $190 level since August 2025. The latest downturn pushed the price below important support levels.

Over the past 12 months, the stock traded between $63.40 and $207.52. On January 2, 2026, around 60.3 million shares changed hands, roughly double the typical daily volume, signaling heightened activity amid the recent pullback.

Near-term outlook

Looking ahead, Palantir is expected to report fourth-quarter 2025 results in early February. Analysts anticipate per-share earnings of $0.23, up about 64% year over year, with revenue around $1.35 billion, up roughly 63% from the prior year.

As Palantir evolves from a meme-driven name into a profitable AI infrastructure provider, market expectations appear to be transitioning toward consolidation and tighter valuation discipline in 2026, rather than another round of extreme price moves.