When a vision stops being just a presentation
"Palantir is the operating system for modern businesses in the era of artificial intelligence," Karp said in a letter to shareholders, adding that demand for their large language models had turned into a "whirlwind of adoption." Such claims are undoubtedly very bold, but looking at the company's quarterly numbers, any doubts begin to disappear. Revenue in the first quarter was $884 million, up 39% from a year ago, and more than the $863 million analysts had expected. When examining the sources of income in more detail, the biggest surprise is commercial sales, which increased by 71% year-on-year. Revenues from government contracts also grew, gaining 55% compared to last year.[1]
Double profit
Given that the company has reached the profitability phase basically recently, it is important to evaluate the development of net profit in addition to sales. According to CNBC, it doubled from last year to $214 million, resulting in adjusted earnings per share of $0.13, which is also identical to analysts' expectations. A look into the future? A solid increase in the full-year revenue forecast, specifically in the range of $3.89 billion to $3.90 billion. But that's not all! Palantir also expects an increase in the free flow of funds, where the upper limit reaches up to USD 1.8 billion. Last but not least, there was an increase in expectations for operating profit, where the company is targeting up to $1.72 billion.
The investor pays for future profits
We are at a time when many technology companies are boasting about pilot projects, but Palantir stands out from this line and reports actually concluded agreements. According to CNBC, 139 contracts with a minimum value of $1 million were signed during the first quarter, with 31 of them exceeding the key $10 million. Such expansion represents exactly what investors want and need to see. When analyzing the company's financial indicators, we can come across the Price to Earings ratio (P/E), which is currently well above 400, which is a consequence of the recent transition to profitability, but with such a growth rate, the current share price may be reasonable, given where the company can grow over time. Therefore, it will continue to be necessary to monitor how Palantir will manage to expand and win new orders.
After the results, a correction came
Despite all the positive news mentioned, the company's shares fell by 9% after the results. However, this decline must be seen in a broader context. Since the beginning of the year, Palantir's share price has risen by about 64%, making it the best-performing stock in the S&P 500 so far, so the short-term correction is also welcome, as it gives investors the opportunity to buy the stock at a more favorable valuation.*
Palantir's share price performance over the past five years
The outlook for the future is positive
Designating Palantir in 2025 as a company exclusively for government contracts is very inaccurate in the current state of the company. Palantir is breaking through as a technological innovator whose products are used across various sectors. In addition, its management is convinced that it is at the center of a new era of digital infrastructure, with the latest quarterly data clearly in favor of the company. But what will happen in a few years? Will Palantir be able to join the ranks of the biggest tech giants?
* Past performance is no guarantee of future results.
[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.
