Palantir Technologies Inc. (NASDAQ:PLTR) is tumbling more than 7.5% at last check on Tuesday, extending Monday's after-hours losses, despite crushing Wall Street's earnings estimates and lifting its outlook—leaving investors asking what went wrong.

Shares of the AI-fueled software company are down more than 8%, leading declines among S&P 500 constituents, just hours after posting one of the strongest earnings reports of the season.

According to Benzinga Pro, Palantir reported earnings per share of 21 cents, beating the estimate of 17 cents by 25%, with year-over-year EPS growth of 110%. Revenue reached $1.18 billion, surpassing the $1.09 billion forecast by 8.2%, representing a 62.8% increase from the prior year.

Fourth-quarter guidance also beat expectations, with revenue projected to rise another 12% above the Street's forecast, and operating margins expanding by roughly 300 basis points.

Yet the stock is getting punished. Why?

Metric

Actual

Estimate

Surprise (%)

Year-over-Year Growth (%)

Earnings Per Share (EPS)

$0.21

$0.17

+25.00%

+110.00%

Revenue

$1.18B

$1.09B

+8.19%

+62.79%

Source: Benzinga Pro

Too Much, Too Fast? A 170% YTD Rally May Be The Culprit

Palantir had surged 170% year-to-date ahead of earnings, making it one of the top-performing stocks in the S&P 500. That explosive rally raised the bar significantly, making even positive results a potential sell-the-news moment.

Goldman Sachs analyst ...