Palantir
posted better-than-expected financial results for the third quarter, getting a boost to its commercial business from its push into artifical-intelligence-powered analytics applications. But some investors may be disappointed by slower growth in the company’s government business.
Thursday morning, Palantir stock (ticker: PLTR) spiked 19% on the news to $17.76. Through Wednesday, Palantir shares were up 133% for the year.
For the quarter, Palantir reported revenue of $558 million, up 17% from a year ago, and ahead of both the guidance range of $553 million to $557 million and the Street consensus forecast as tracked by FactSet of $556 million.
Adjusted income from operations was $163 million, above the guidance range of $135 million to $139 million. Adjusted profits were 7 cents a share, a penny above consensus. Under generally accepted accounting principles, Palantir earned $72 million, or 3 cents a share.
Palantir said commercial revenue was up 23% to $251 million, well above the Street consensus forecast at $234 million. That includes a 33% increase in U.S. commercial business to $116 million—a 19% increase sequentially. CEO Alex Karp said in a letter to shareholders that the strength is attributable to “growing demand” for the company’s recently launched AI platform.
Palantir said the company closed more than 80 deals each worth $1 million or more in the quarter, with 29 deals each worth at least $5 million, a dozen of those each worth at least $10 million.
Karp said in an interview with Barron’s that he thinks the U.S. commercial business—powered by AI—will hit a $1 billion run rate by the first quarter of 2025, which would suggest it will more than double in size from here.
“Companies across industries in the United States are scrambling to deploy software platforms that will allow them to leverage the power of the latest large language models,” Karp wrote in the letter. “And we have built what they need.”
Karp says the U.S. commercial business was up 52% if adjusted for the company’s portfolio of investments in SPAC-related new offerings. In what turned out to be a less-than-successful strategy, Palantir several years ago invested in private offerings of several dozen companies that were going public via reverse mergers into special-purpose acquisition companies, in exchange for a commitment to use Palantir’s software. But many of those companies have run into financial trouble, with some going under. The company has stopped investing in SPAC deals.
Karp also said it has begun conducting one-to-five day “boot camps” with potential customers for its AI software, replacing a previous practices of doing multi-month pilot projects. Karp said the company expects to conduct 250 boot camps by the end of the year; he contrasted that to 141 pilot projects with potential clients in 2022. Karp said that more than 300 customers have adopted Palantir’s AI software since it was launched earlier this year.
Government revenue in the quarter was $308 million, up 12% from a year ago, but falling shy of Street consensus at $321 million. “It’s just a lumpy business,” Karp said. “We’re seeing unprecedented levels of inquiries for our products, and we’re optimistic that will break in our direction sometime in the near future.”
Karp also emphasized that the company is strongly supporting Israel in its current war with Hamas, and that it has made all of its products available to the country’s government. Among other things, the company makes “battlefield management” software. Karp notes that Palantir has a longstanding relationship with Israel. The company bought a full-page ad in the New York Times that reads in large type, “Palantir Stands With Israel.”
For the fourth quarter, Palantir is projecting revenue of $599 million to $603 million, at the middle of the range and just slightly above the Street consensus at $600 million. Palantir projects adjusted net income from operations of $184 million to $188 million, ahead of consensus at $177 million. The company expects to again be GAAP profitable in the quarter.
Palantir now sees full-year revenue of $2.216 billion to $2.22 billion; previously the company said the figure would be above $2.212 billion. Adjusted income from operations is now projected to range from $607 million to $611 million, which compares with a previous forecast of more than $576 million.
Karp also noted in his letter that with four consecutive quarters of GAAP profitability Palantir is now eligible for inclusion in the
S&P 500 index,
“a milestone that we have been working toward and knew was within reach.”
Write to Eric J. Savitz at eric.savitz@barrons.com
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