PLTR Earnings Preview: Will momentum continue?
Palantir Technologies (PLTR) is set to report Q3 earnings on November 4, with analysts anticipating earnings per share (EPS) of $0.09, reflecting a 29% year-over-year (YoY) increase, and revenue of approximately $703.7 million, up 26.1% YoY. This earnings report comes after a strong Q2 performance where Palantir beat revenue expectations and demonstrated strong demand in AI-driven solutions, particularly in defense and commercial applications. With its S&P 500 inclusion in September, the company’s visibility and access to institutional investors have further solidified its position in the market.
Beyond EPS and revenue, investors should focus on key metrics, including growth in government and commercial revenue, adjusted operating margins, and customer acquisition trends. Palantir’s AI Platform (AIP) is expected to drive demand, especially as the company leverages its ability to transition AI projects from prototype to production. Management’s guidance on new AI-focused products, such as Apollo, will also be critical in gauging the company’s growth potential across diverse sectors.
Several recent deals are likely to contribute positively to Palantir’s commercial business. In October, Palantir announced a partnership with L3Harris to enhance U.S. Army programs using AI for operational improvements and decision-making. Additionally, Palantir has expanded its healthcare reach through a multi-year contract with Nebraska Medicine, where its AIP software has reportedly improved hospital operations. Another key partnership includes BP, which is now using Palantir’s AI software to support its energy transition and optimize decision-making.
Palantir's stock has experienced significant price appreciation, rising 142% year-to-date, outperforming both the S&P 500 and the tech-software sector. However, this impressive run-up brings valuation concerns, as Palantir’s price-to-sales (P/S) ratio now stands near 40x, significantly higher than some industry peers like Snowflake and IBM. Given the stock's lofty valuation, even minor earnings disappointments or signs of slowing growth could lead to substantial price volatility.
The valuation challenge is compounded by high investor expectations surrounding Palantir’s AI capabilities and future growth trajectory. Investors will be particularly focused on the company’s guidance for FY24 and updates on its ability to secure new contracts and expand in international markets, where European headwinds have previously slowed growth. Any adjustments to outlook or evidence of softened demand in commercial AI could impact Palantir’s stock performance.
On September 6, Palantir Technologies (PLTR) announced its inclusion in the S&P 500, sparking a sharp rally in its stock price, which has surged to levels unseen since early 2021. This move follows Palantir’s ongoing profitability streak, strong Q2 performance, and growing traction in both government and commercial sectors, including partnerships with major companies like ExxonMobil and United Airlines. However, PLTR's valuation now appears elevated, trading at a high multiple compared to peers such as Snowflake and IBM, which could lead to volatility if investor sentiment shifts. Although headwinds in Europe present challenges, PLTR's strategic expansion into Asia and the Middle East supports international growth. As a prominent player in the AI sector, Palantir remains a valuable long-term asset, but its lofty valuation suggests caution in the near term amidst the intense competition and high expectations within the AI industry. Palantir Technologies delivered a strong Q2 report, beating both top- and bottom-line estimates, which prompted a boost to its FY24 revenue forecast. With a 27.2% year-over-year revenue increase to $678 million and an 80% jump in adjusted EPS, Palantir demonstrated robust demand for its AI capabilities, particularly in government contracts, which grew 23% year-over-year. The company’s expertise in moving AI from prototyping to production has become a competitive advantage, securing several significant U.S. government contracts and achieving a 41% rise in customer count. Despite international headwinds, especially in Europe, PLTR’s expansion in Asia and the Middle East and its strengthened commercial revenue helped offset challenges. The positive results, along with an optimistic FY24 outlook, reaffirm Palantir’s position as a distinguished player in the AI sector.
In summary, Palantir’s Q3 earnings will provide insights into its competitive standing in the AI market and ability to sustain high growth rates in both government and commercial sectors. With high valuation and elevated expectations from its S&P 500 inclusion, the company must deliver strong results and robust guidance to maintain investor confidence.