After a run that has already transformed the stock this year, Palantir (NASDAQ: PLTR) just put up the kind of quarter bulls wanted to see. Yet shares fell sharply the day after the report, as investors balanced record results with a sky-high valuation -- a familiar tension for this stock.

So, with such strong results and robust confidence in forward guidance, what caused the downturn in PLTR stock? According to analysts, it's possible that the equity simply accelerated too quickly over too short a time span.

Palantir Technologies fell around 6% on Tuesday as a strong quarterly update from the company failed to extend its record-breaking rally.

Palantir has seen demand for its software soar in recent quarters, and that’s translated into enormous revenue growth. The company also has done an outstanding job of balancing revenue growth with profitability.

His fund, Scion Asset Management, has revealed bearish positions on Nvidia Corp and Palantir Technologies, two of the leading stocks in the AI rally that has propelled US equities to record highs.

Meanwhile, Veteran analyst Stephen Guilfoyle credits Palantir’s growth to strong fundamentals, noting, “Sales are running wild as are margins. The commercial business is exploding. Cash flows are not just robust; they are enormous. The balance sheet is simply the greatest balance sheet I can remember seeing. The CEO is focused and aggressive.”

Palantir Technologies recently reported third quarter 2025 results that exceeded Wall Street expectations, highlighting a 63% year-over-year revenue increase and a significant 121% growth in U.S. commercial sales,

Palantir Technologies Inc.’s pricey valuation has long confounded Wall Street but investors have largely ignored those calls, instead pushing the stock to yet another record ahead of earnings.

Palantir is set to report its latest quarterly results after the closing bell Monday, with traders expecting a big move from the AI software maker's stock that could take it to new highs.

Palantir Technologies' valuation is detached from its fundamentals, making its risk/reward profile deeply unattractive. Click here to read why PLTR is a Sell.