The recent earnings season has proven to be lucrative for companies leveraging generative artificial intelligence (AI) software. Industry giants such as Microsoft, IBM, ServiceNow, Amazon, and Meta have all reported impressive results, partly due to their reliance on AI technology.
Palantir, a company that has placed a significant emphasis on AI, aims to join this list of successful companies with its upcoming fourth-quarter financial report, to be released after the trading session closes on Monday.
For this quarter, Palantir has provided guidance indicating revenue between $599 million and $603 million, with adjusted income from operations estimated at $184 million to $188 million. Analysts surveyed by FactSet predict revenue of $603 million, operating revenue of $187 million, and an adjusted profit of 8 cents per share.
Although Palantir is best known for its data analytics software used by U.S. and foreign governments, the company is experiencing higher growth within its commercial customer base. Analysts further anticipate fourth-quarter government revenue of $333 million, a 13.6% increase, paired with commercial revenue amounting to $271 million, reflecting a surge of 26.1%.
In the previous quarter, Palantir achieved strong financial performance, with its commercial revenue reaching $251 million, surpassing expectations and growing by 23%. This growth includes a remarkable 33% increase in U.S. commercial revenue, amounting to $116 million.
In conclusion, Palantir’s focus on AI technology has propelled its growth and paved the way for a successful fourth quarter. The company’s strong financial results, coupled with its expanding commercial customer base, demonstrate its continued ability to thrive in this competitive market.
Introduction
Palantir, a company originally funded by the CIA’s venture capital arm, In-Q-Tel, has gained attention for its vocal support of the U.S. military. In 2020, the company made the decision to move its headquarters from Palo Alto to Denver, as it believed its business focus did not align with the Silicon Valley culture. The company’s CEO, Karp, has also been a strong advocate for the Israeli military, which happens to be one of Palantir’s customers.
Embracing Retail Investors
One unique aspect of Palantir is its dedication to engaging with retail investors. While most companies reserve their earnings calls for Wall Street equity analysts, Palantir welcomes questions from individual investors who submit them online. This inclusive approach has played a significant role in boosting Palantir’s popularity and consequently, its valuation.
Impressive Valuation Growth
Palantir’s valuation has seen substantial growth in recent years. Currently, the stock trades at 57 times the consensus forecast for 2024 profit ($0.29 per share) and approximately 14 times the forecast for 2024 revenue ($2.6 billion). This projection indicates a promising 19% growth from an expected revenue of $2.2 billion in 2023.
Analyst Caution and Potential Risks
Despite the positive outlook, Citi analyst Tyler Radke remains cautious about Palantir’s performance. Radke has given the company a Sell rating and anticipates underwhelming federal deal activity in the upcoming quarter, which may counterbalance any strength in U.S. commercial deals. Moreover, Radke believes that the high valuation combined with just “teens top-line growth” exposes investors to potential downside risk.
Recent Performance
Over the last 12 months, Palantir shares have enjoyed a remarkable 84% rally. However, the stock has decreased by 4% since the beginning of this year, reflecting some recent challenges.
In conclusion, Palantir continues to shape the future with its unique approach, dedication to the U.S. military, and growing support from retail investors. While the stock’s valuation is impressive, analysts remain cautious about potential risks and downside risks associated with Palantir’s high valuation. As the company navigates its path, investors and industry experts will closely monitor its performance.