Palantir Technologies (PLTR 0.51%) stock has been flying high in 2024 thanks to the company's growing artificial intelligence (AI) credentials, but investors were in for a shock after the data analytics and software platform provider released its first-quarter results on May 6.

Shares of Palantir fell 15% the following day. That may seem a tad surprising at first since Palantir's revenue exceeded Wall Street's estimates, earnings matched the consensus, and guidance was also ahead of what analysts were expecting. However, a sharp deceleration in one of Palantir's business segments seems to have led investors to press the panic button.

Palantir Technologies investors worried about this key metric

Palantir's Q1 revenue increased 21% year over year to $634 million. This exceeded the high end of management's guidance for $616 million, and it also beat the $615 million consensus estimate. Meanwhile, non-GAAP earnings increased 60% year over year to $0.08 per share, in line with what analysts were expecting.

The company is forecasting $651 million of revenue in the current quarter at the midpoint of its guidance range. That represents a 22% increase from the year-ago period and a slight acceleration on the top line thanks to strong growth in the company's AI-related bookings.

Even better, Palantir raised its full-year revenue guidance to $2.68 billion from the earlier expectation of $2.66 billion. At the same time, Palantir increased its operating income guidance from $842 million to $874 million (both figures at the midpoint).

However, what grabbed investors' attention most was Palantir's U.S. commercial revenue growth, up 40% year over year to $150 million. That marked a significant step down from the 70% growth it reported in Q4 2023. But a closer look at some of Palantir's key metrics last quarter tells us investors may be overreacting.

Here's what the bigger picture looks like

Though Palantir's U.S. commercial growth slowed, it raised its full-year growth outlook for this segment to at least 45% from the earlier estimate of 40%. That's not surprising as the rising adoption of Palantir's AI software platform is translating into impressive gains for customer count and contract value.

More specifically, Palantir's U.S. commercial customer base increased an impressive 69% year over year, up from 55% the previous quarter.

Another important thing worth noting is that Palantir's customers are signing bigger deals. The company closed 87 deals worth $1 million or more in the first quarter, versus 64 large deals a year ago. This improvement in deal activity and the new customers Palantir has brought into the fold explain why its remaining performance obligations (RPO) increased 38% year over year to $1.3 billion.

RPO refers to the total value of a company's future contracts that it has yet to fulfill. So, the faster growth in this metric compared to Palantir's revenue means the company is building a solid revenue pipeline. Palantir, however, also pointed out that its RPO primarily consists of commercial business, and it doesn't account for contracts whose initial term is shorter than a year.

As a result, its remaining deal value (RDV) metric gives a better picture of its revenue pipeline. RDV, which refers to "the total remaining value of contracts as of the end of the reporting period," stood at $4.1 billion last quarter, up 22% year over year.

In all, Palantir stock's sell-off following the latest earnings announcement seems short-sighted. The company has revised its full-year outlook upward, and long-term growth appears here to stay given the growing demand for AI software. Even analysts expect its earnings to increase at an annual rate of 85% over the next five years.

This is why investors looking to add a growth stock to their portfolios should consider capitalizing on the latest pullback in Palantir Technologies, as it can still soar in the long run.