Shares of Palantir Technologies Inc. experienced a significant drop of nearly 10% in morning trading on Wednesday, despite receiving an upgrade from HSBC. The financial institution raised its rating for Palantir from “Hold” to “Buy” and increased its price target from $197 to $205.
HSBC analyst Stephen Bersey expressed optimism about the company’s prospects, particularly in the U.S. commercial sector. He projects a remarkable compound annual growth rate of 58.8% for that segment from 2025 to 2029, potentially reaching $9.3 billion by the end of that period. Bersey highlighted robust financial performance in the fourth quarter of 2025, where Palantir reported a staggering 137% increase in revenue year-on-year, totaling $507 million, compared to a 122% rise in the previous quarter. Additionally, the new agreements saw a total contract value of $1.344 billion in Q4, up from $1.310 billion in Q3.
Despite Bersey’s optimistic upgrade and higher price target, he issued a note of caution regarding the return on invested capital for some of Palantir’s internal enterprise AI projects, indicating that disappointing returns could hinder future contract signings. This cautious sentiment appears to have resonated more strongly with investors than the positive revenue figures, resulting in the decline in share price.
Market participants are expected to closely monitor upcoming sales figures and contract disclosures for signs of sustainable growth in Palantir’s commercial operations. Analysts and investors are particularly eager for the company’s next quarterly update, which will provide further insights into its financial trajectory and strategic direction.
