Apple and Palantir shares fall despite earnings beats
Apple (NASDAQ:AAPL) and Palantir Technologies (NASDAQ:PLTR) saw their shares decline in after-hours trading on Tuesday, November 3, 2026, even though both companies reported quarterly results that exceeded analysts’ expectations. The sell-off was driven by forward-looking concerns: Apple issued a weaker-than-expected gross margin outlook, while Palantir’s growth in total contract value slowed significantly. These developments contributed to cautious trading in US stock futures ahead of the upcoming midterm elections.
What happened in the earnings reports
Apple reported fiscal fourth-quarter earnings per share of $2.10, a 14% increase from the previous year, with revenue rising to $114.5 billion. Both figures beat Wall Street expectations, supported by continued demand for the company’s products. However, sales in China reached $17.5 billion, falling short of forecasts, and demand in Japan was also weaker than expected. Free cash flow totaled $26.8 billion, which was below consensus estimates but still substantial compared to many technology companies investing heavily in artificial intelligence.
Palantir Technologies reported third-quarter earnings per share of $0.44, exceeding market expectations. Revenue increased 96% year on year to $2.31 billion, driven by strong demand from US commercial customers and government agencies. The company also issued fourth-quarter guidance above analysts’ forecasts, expecting revenue between $2.649 billion and $2.653 billion and operating income between $1.64 billion and $1.644 billion.
For Apple, the primary concern was the profitability outlook. The company forecast gross margins of between 45% and 46% for the current quarter, which was below analysts’ expectations of approximately 47%. Apple attributed this pressure to rising memory chip prices, which are increasing production costs ahead of the holiday shopping period. This marks an early challenge for new Chief Executive Officer John Ternus, who took over from Tim Cook. Analysts at Evercore ISI noted that while underlying hardware demand remains healthy, investors are increasingly focused on profitability rather than sales growth alone.
For Palantir, the decline was tied to a slowdown in total contract value growth. This metric, which tracks the aggregate value of contracts signed during a reporting period, is closely monitored as an indicator of future revenue. Growth in total contract value slowed to 6% year on year in the third quarter, compared with 49% in the second quarter. Although revenue from existing operations expanded rapidly, this deceleration raised questions about the pace of new business commitments. Analysts at William Blair acknowledged the strength of the quarterly earnings but suggested that the contract value figures could limit enthusiasm for the stock.
What this means for investors and the market
The reactions to these earnings reports highlight a shift in investor sentiment regarding the sustainability of artificial intelligence investment spending. Much of the spending on data centers and computing capacity has been supported by debt and equity financing, raising concerns about whether financial markets can continue absorbing these capital requirements. Analysts at Vital Knowledge warned that if debt and equity cannot be absorbed, industry capital expenditure will inevitably be scaled back.
Apple shares had gained more than 24% since the beginning of 2026, partly because investors viewed the company as less exposed to the financial risks associated with large-scale AI infrastructure spending. However, the current margin pressure suggests that even companies with strong cash flows are not immune to rising component costs across the consumer electronics industry. Manufacturers may have to absorb higher expenses or pass them on to customers, which could impact consumer pricing in the coming months.
For investors, the key takeaway is that strong top-line growth is no longer sufficient to drive stock prices; margins and the quality of future revenue commitments are now under greater scrutiny. This is particularly relevant for those following the how to read an earnings report guide, as forward-looking metrics often carry more weight than backward-looking results in today’s market.
What happens next
US stock futures traded cautiously on Tuesday, with S&P 500 futures down 14 points (0.2%) and Dow Jones futures declining 260 points (0.5%) as of 02:56 ET. Nasdaq 100 futures gained 21 points (0.1%). The subdued performance followed a mixed session on Monday, where the Nasdaq Composite fell 1.07% as investors questioned the sustainability of AI investments. Oil prices also recovered following reports of a limited US military strike against Iran’s Qeshm Island, renewing concerns about potential disruptions to energy supplies through the Strait of Hormuz.
Investors will be watching for further clarity on memory chip prices, which could stabilize or decline in the coming quarters, potentially easing pressure on Apple’s gross margins. For Palantir, the focus will remain on whether the company can reaccelerate its contract value growth to support its high revenue growth rate. The upcoming US midterm elections also add a layer of uncertainty, as political shifts could impact regulatory environments and government spending priorities that affect both companies.
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