May 6 (Reuters) - Shares of Palantir Technologies slumped more than 12% on Tuesday, after quarterly results and a raised forecast failed to meet the high expectations of Wall Street investors, who had driven the stock price up significantly ahead of earnings.

The data analytics company's stock had gained 63% ahead of earnings this year, following a more than fourfold increase last year, fueled by AI-powered growth and government contracts.

"We believe we have reached a point where respectable earnings beats and raised guidance aren't enough to materially move the stock to the upside," Morningstar analyst Mark Giarelli said.

Palantir is set to lose more than $40 billion from its market valuation of $292.06 billion if losses hold.

The Denver, Colorado-based company is a significant beneficiary of increased AI-driven demand and strong government contracts, with its AI software solutions being widely used across U.S. commercial sectors such as healthcare, energy, and automotive.

Palantir's total revenue grew 39% in the first quarter to $883.9 million, with U.S government revenue up 45% from a year earlier. Analysts had expected quarterly revenue of $862.8 million, according to data compiled by LSEG.

Despite the seasonally light quarter, analysts noted strong demand for Palantir's solutions, with its U.S. business driving results and securing the "lion's share" of new customers in the quarter.

"Despite recent uncertainty introduced from tariff announcements, Palantir continues to see underlying momentum in the business, landing a record number of $1M deals," analysts at D.A. Davidson said.

The company now expects full-year revenue to be between $3.89 billion and $3.90 billion, up from its earlier forecast of sales between $3.74 billion and $3.76 billion.

At least 9 brokerages raised their price target for Palantir after earnings, bringing the PT median to $96.46.

Palantir's 12-month forward price-to-earnings ratio is 202.07, compared with Snowflake's 131, Salesforce's 23.48 and Datadog's 54.81.