To The Moon

Earnings Review: Palantir's Revenue Accelerates, Yet the Stock Fell After Hours—Why?

$Palantir Technologies Inc.(PLTR)$   's use of AI propelled outperformance in both government/defense and commercial markets, as reflected in today's earnings. The company's third-quarter revenue was $1.18 billion, up 63% year over year, beating analysts' estimate of $1.09 billion. Full-year revenue guidance was raised to $4.40 billion, a sharp increase from the prior $4.14–$4.15 billion range. This is the third time this year the company has raised its annual outlook.

However, its fourth-quarter guidance implies that year-over-year revenue growth in the next earnings report may be flat with the third quarter, which has raised market concerns about Palantir's valuation.

Core Financial Indicators

Revenue: Third-quarter revenue was $1.18 billion, up 63% year over year, beating analysts' estimate of $1.09 billion.

Net income: Net income for the quarter surged to $475.6 million, up more than twofold year over year.

EPS: Adjusted EPS was $0.21, above the $0.17 expected.

Business Segment Breakdown

Commercial Business:

The standout highlight of Palantir's quarterly report was undoubtedly the remarkable performance of its U.S. commercial business. Revenue in this segment surged 121% year over year to $397 million, nearly twice analysts' expectations. The total value of U.S. commercial contracts more than quadrupled to $1.31 billion.

The company raised its full-year U.S. commercial revenue guidance to $1.43 billion, implying triple-digit growth will continue in the fourth quarter.

In the third quarter, international commercial revenue rose by 10% year over year and 5% quarter over quarter to $152 million. Compared with the US commercial business, growth in the international commercial segment was relatively slower.

Government Business:

While the commercial business is surging, Palantir's traditional strength—its government segment—remains solid. In the third quarter, U.S. government revenue grew by 52% year over year, and international government revenue rose 66%, well above the 37% growth recorded in the previous quarter. A milestone development: the U.S. Army issued an official memorandum directing all Army organizations to consolidate onto Vantage, a data platform built on Palantir Foundry and AIP.

Earnings Guidance

The earnings guidance shows that Palantir expects fourth-quarter revenue to reach a new historical high. Fourth-quarter revenue is expected to be $1.33 billion, well above the market expectation of $1.19 billion.

At the same time, Palantir is more optimistic about its full-year performance outlook. This marks the third consecutive quarter in which the company has raised its full-year earnings guidance during the quarterly earnings report.

Full-year revenue guidance was raised to $4.40 billion, a significant increase from the prior $4.14–$4.15 billion. Free cash flow guidance was lifted to $1.9–$2.1 billion. This is the third time this year the annual guidance has been raised.

However, the median revenue growth implied by Palantir's fourth-quarter guidance is 61%, a slight slowdown from 63% in the third quarter. For a company like Palantir that relies heavily on accelerating performance, this could put some pressure on its valuation. In addition, reforms to the U.S. Department of Defense's procurement process may lead to procurement pauses, adding uncertainty to fourth-quarter results.

Summary

Overall, the earnings report exceeds expectations. However, the company's current price-to-sales ratio still exceeds 100 times, which is still the highest valuation since its listing. Besides, the slowdown in the growth rate indicated by the fourth-quarter guidance may raise market concerns.

The stock price decreased by more than 3% after the earnings release.

@TigerStars  @CaptainTiger  @TigerWire  @Daily_Discussion   @Tiger_chat  @Tiger_comments  @MillionaireTiger