Palantir surges to all-time highs as AI monetization expands
AInvestMonday, Nov 4, 2024 6:26 pm ET
2min read
PLTR --

Palantir Technologies reported a robust Q3 earnings performance, surpassing Wall Street expectations on both revenue and earnings. The company posted adjusted earnings of $0.10 per share, beating the consensus estimate of $0.09, and achieved revenue of $726 million, which exceeded analyst expectations of $705 million. This marks a 30% year-over-year revenue growth, underscoring Palantir's solid execution and demand for its AI solutions. Palantir's performance and the upbeat guidance for Q4 and the full fiscal year have further fueled investor enthusiasm, as evidenced by a 13% jump in after-hours trading.

Commercial revenue was a standout in Q3, with U.S. commercial revenue rising 54% year-over-year to $179 million, a testament to Palantir's expanding foothold in the private sector. The company’s U.S. government revenue also saw strong growth, up 40% year-over-year. Overall, U.S. business growth outpaced the company’s broader expansion, with total U.S. revenue climbing 44%. CEO Alex Karp emphasized that the results are evidence of the real-world value of AI applications beyond large language models, citing the practical benefits Palantir's technology is delivering to clients across industries.

Guidance for the fourth quarter is optimistic, with Palantir forecasting revenue between $767 million and $771 million, above the $745 million consensus. The company also raised its full-year revenue guidance to a range of $2.8 billion to $2.81 billion, up from the previous estimate of $2.7 billion to $2.8 billion. Adjusted operating profit is expected to be between $1.05 billion and $1.06 billion for the full year, also ahead of prior guidance. Additionally, Palantir projects adjusted free cash flow to exceed $1 billion, indicating strong financial health and cash generation capabilities.

Key metrics also highlight Palantir’s strong financial position and growth momentum. The company reported an adjusted operating margin of 38%, up from 29% in the same quarter last year, and adjusted free cash flow of $434.5 million, a significant increase from $140.8 million a year prior. With cash and cash equivalents totaling $768.7 million, Palantir remains well-capitalized to fund further expansion and strategic initiatives, including investments in its AI platforms and potential new partnerships.

Commentary from the earnings call reflects Palantir’s confidence in its AI offerings and their market impact. Chief Revenue Officer Ryan Taylor noted that the company's AI platform is enabling substantial operational efficiencies for clients, such as an insurance company that reduced its underwriting time from two weeks to three hours. Palantir’s AI-driven solutions are showing tangible value across industries, from defense to healthcare, underscoring the company's competitive edge in delivering production-ready AI applications.

Palantir’s government business remains a critical growth engine, representing the bulk of total revenue. In Q3, government revenue grew 40% year-over-year, bolstered by significant deals across U.S. defense and intelligence agencies. The company’s partnerships, such as those with L3Harris and Microsoft, are expanding its role in national security and solidifying its standing as a strategic partner in critical U.S. government operations. These partnerships further differentiate Palantir from other AI-focused software companies, adding stability to its revenue base.

Looking ahead, Palantir’s growth strategy is underpinned by increasing adoption of its AI platforms in both government and commercial sectors. The company’s recent inclusion in the S&P 500 has broadened its investor base, while the elevated guidance reflects strong demand momentum. Despite high expectations and a premium valuation, Palantir’s Q3 results reaffirm its position as a leader in real-world AI applications, providing investors with confidence in its long-term potential. However, with a substantial rally this year, valuation concerns may emerge if growth decelerates or competition intensifies in the AI and analytics market.

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