Despite elevated volatility for the broader market, Palantir (PLTR -12.01%) stock saw explosive gains across April's trading. The company's share price climbed 40.3% in the month amid a 0.8% decline for the S&P 500 and a 0.9% decline for the Nasdaq Composite.

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Palantir's valuation surged last month thanks to new contract wins and partnership announcements. But the company's share price has seen a big pullback in May following the publication of its first-quarter earnings results.

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Palantir stock defied market volatility in April

The implementation of new tariffs spurred huge volatility for the broader market last month, but Palantir managed to post gravity-defying gains even as trade-war concerns took center stage. The company saw gains in conjunction with news that it had won a new contract with the U.S. government to provide services for the country's immigration enforcement initiatives. Palantir stock also got a boost from positive coverage from analysts and news that the company was expanding its partnership with Alphabet.

With the market concentrating on trade war issues, Palantir's geographic sales composition helped the company see huge valuation gains last month. The company's business is centered on providing data analytics and artificial intelligence (AI) services to the U.S. and its allies, and investors poured into the stock last month with the expectation that the software will see minimal adverse impacts in the face of trade headwinds. However, the company's Q1 earnings report has spurred movement that's cut into some of last month's gains.

After Q1 earnings, Palantir stock is pulling back in May

Palantir published its first quarter results after the market closed Monday. The company's non-GAAP (adjusted) earnings per share of $0.13 met Wall Street's expectations for the period, and its revenue of $884 million beat the average analyst estimate by $21 million. Sales were up 39% year over year in the period, and adjusted net income was up 70%. The stock has now fallen 6% in May, but it's still up 44% in 2025.

With the Q1 release, Palantir also raised its full-year targets. While the company had previously guided for full-year sales to be between $3.74 billion and $3.76 billion, it's now guiding for annual sales between $3.89 billion and $3.9 billion. The company also raised its free cash flow (FCF) target from between $1.5 billion and $1.7 billion to between $1.711 billion and $1.723 billion. Adjusted operating income is projected to be between $1.551 billion and $1.567 billion -- up from previous guidance for adjusted operating income between $1.551 billion and $1.567 billion.

While the company delivered a significant sales beat in the first quarter and substantial upward guidance revisions, the market was banking on an even better performance outlook. The sell-off on the heels of an otherwise strong quarterly report highlights the risks that come with Palantir's highly growth-dependent valuation.