Palantir’s Air-Traffic Ambitions Collide With a Brutal Sector Selloff

The software group chasing a multibillion-dollar contract to modernise America’s airspace is also fighting a rear-guard action on the stock market. Palantir has been named alongside Thales and Air Space Intelligence in the final round of the Federal Aviation Administration’s SMART competition — a project that would give air-traffic controllers the ability to spot conflicts up to two hours in advance, compared with the current 15-minute window. The award is part of a $32.5 billion modernisation programme to replace ageing radar systems and ramp up staffing.

Yet even as the company positions itself for what could be a transformative government win, its shares are under severe pressure. On Thursday, Palantir tumbled 7.2 per cent in a sector-wide rout triggered by disappointing results from IBM and a brutal 18 per cent collapse in ServiceNow. The cloud-software group blamed delayed contract closures in the Middle East linked to stalled US-Iran negotiations and warned that AI investments were squeezing margins in the near term. The contagion spread fast: Salesforce lost 4.5 per cent, Oracle fell 3 per cent, and Intuit shed nearly 3 per cent. Palantir was swept along, even though its own business fundamentals remain intact.

The selloff reflects a growing debate among investors about whether generative AI tools are cannibalising demand for traditional enterprise software — a thematic shift that has little to do with Palantir’s specific trajectory. But the stock’s valuation leaves it acutely vulnerable to such sentiment swings. At roughly $338 billion in market capitalisation, Palantir trades at 200 times trailing earnings, 118 times forward earnings, and 87 times sales. Those multiples leave no margin for error.

The current share price of around €124 is roughly 13 per cent below where it started the year and about 31 per cent off the 52-week high hit in late 2025. That retreat has been driven partly by geopolitical rotation out of risky growth names, and partly by a growing recognition that even Palantir’s blistering growth rates will eventually cool. Analysts expect government revenue growth to slow from recent highs to 42 per cent in 2026 and 31 per cent in 2027.

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

Palantir does enter the FAA contest with a structural edge. The agency’s workflows already run on the company’s Foundry platform following a recently won data contract, and the group’s deep ties to the federal apparatus were reinforced last summer by a multibillion-dollar framework agreement with the US Army. Thales brings decades of experience supplying government systems, while Air Space Intelligence provides the software that has helped Alaska Airlines cut fuel costs since 2021.

The company’s financial performance has been strong by any conventional measure. In the fourth quarter of 2025, revenue surged 70 per cent to $1.41 billion, with the US commercial segment jumping 137 per cent. For the full year, sales climbed 56 per cent to $4.48 billion, while net liquidity stood at $7.2 billion with zero debt. Management guided for first-quarter 2026 revenue of $1.532 billion to $1.536 billion, and analysts expect earnings per share of $0.28, up from $0.13 a year earlier.

Morgan Stanley sees the current weakness as a potential inflection point, citing sustained US business momentum and the possibility of an upward revision to full-year guidance. The bank maintains an equal-weight rating with a $205 price target. But the fundamental risk remains acute: with a forward price-to-sales ratio of roughly 50, any crack in the growth narrative could trigger an immediate correction.

All eyes are now on 4 May, when Palantir reports first-quarter results after the US market close. The earnings release lands almost simultaneously with the final stages of the FAA competition. If the company can sustain its torrid growth pace, that could buttress the stretched valuation and reignite the stock. If the numbers disappoint, the chart support at the 100-day moving average near €134 could come into play — a level the shares have already fallen through.