Palantir Lifts Forecast After 96% Revenue Jump

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Palantir grew third-quarter revenue 96% to $2.3 billion and raised its full-year forecast. Investors were not won over at once, in a week when the AI trade has been under strain.

Revenue, earnings and outlook

The company reported the growth on Monday. Chief financial officer David Glazer called it the highest year-over-year rate Palantir has reported, and said sequential growth of 20% was also a record. Quarterly revenue passed $2 billion for the first time.

Earnings came in at 44 cents a share, both adjusted and under GAAP. A year earlier adjusted EPS was 21 cents and GAAP EPS was 18 cents. Analysts had expected revenue of $2.18 billion and adjusted earnings of 41 cents. Palantir's own guide had been about $2.16 billion.

For the full year it now expects revenue of about $8.53 billion, roughly 91% growth, up from as much as $8.2 billion a quarter ago. For the current quarter it forecast $2.64 billion to $2.65 billion, around 88% growth at the midpoint. Analysts had pencilled in about $2.46 billion.

Commercial sales pass government

Investors watch U.S. commercial revenue closely, since it shows whether companies, not only governments, will pay for AI software. It rose 148% to $984 million, from $397 million a year ago. For the first time it exceeded U.S. government revenue, which grew 96% to $953 million from $486 million.

Total contract value rose 6% to $2.9 billion. U.S. commercial contract value grew 11% to $1.5 billion. Guidance for U.S. commercial revenue growth went up to 143% for the year.

A cooler market for AI stocks

The shares first rose about 1.5% after hours, then fell 3.6%. Fortune described Palantir as a bellwether for confidence that AI software turns into revenue. The report followed Alphabet's worst one-day drop in its 22 years as a public company, a loss of $505 billion in market value since its own results. Intel fell about 29% last week, and Amazon was also poorly received. The Nasdaq Composite lost more than 1% on Monday and is down 4% over five days.

Concern is growing that AI spending, near $2 trillion in two years by S&P Global's estimate, is running well ahead of returns.

Karp's pitch

CEO Alex Karp wrote in his quarterly letter to investors that calling the results "extraordinary" would be an understatement, and that every industry, from banks to hospitals, "will either be remade or set briskly aside". On the analyst call he said potential clients now seek out Palantir because they worry about their intellectual property, and that promising leads now turn into firm ones faster.

Our view

A growth rate this high and a sales mix tilting toward private companies speak to the question investors keep asking. The muted share reaction suggests the question has moved on to whether such growth can last after a week of selling. The next quarterly report, against a forecast of about 88% growth, will be the first test.

Source: Fortune