Palantir Technologies Inc (NYSE: PLTR) reported its second-quarter results during Monday’s after-hours trading session.
The big data analytics company reported its second-quarter revenue jumped 13% year-over-year to $533.3 million, just ahead of the consensus for sales of $532.4 million. The company posted an operating profit of $10.1 million, or $135 million on an adjusted basis. This translates into adjusted earnings per share of 5 cents, in line with the Street consensus.
Breaking Down Palantir’s Q2 Performance
Palantir generated $96 million in free cash flow in Q2, up 58% YoY. The adjusted margin expanded by 200 basis points to 25%, easily clearing the 23.1% expected by Wall Street analysts. GAAP net income was $28 million, marking the third consecutive quarter of GAAP profitability.
For this quarter, Palantir sees revenues at $555 million (up or down $2 million), beating the consensus for Q3 revenue of $553.9 million. The adjusted operating profit is seen at $137 million, better than the $129 million expected.
On a full-year basis, the company updated its full-year forecast so it now sees revenues at $2.21 billion, in line with the consensus, while it was previously guiding for $2.19-2.24 billion. The adjusted operating profit is now seen at $576 million, a meaningful increase relative to the prior guidance for $506-556 million. Analysts were looking for $530.3 million.
Palantir also announced its Board has authorized a share buyback program of up to $1 billion. Cash, cash equivalents, and short-term U.S. treasury securities at the end of the second quarter stood at $3.1 billion.
The stock initially plummeted more than 10% before recovering to trade mostly flat in the early Tuesday trade. According to The Trading Analyst’s senior options trader Tyler Corvin, the options market was pricing in a ±14.9% post-earnings move in PLTR stock.
Investors are likely concerned about the full-year revenue forecast, while on the other hand, the company’s profitability picture has improved in recent quarters. Moreover, not many were expecting a stock buyback program of this size.
Demand for AIP ‘Unlike Anything We Have Seen’
The company’s commercial revenue rose 10% YoY to $232 million while sales from government contracts jumped 15% to $302 million. In a shareholder letter, CEO Karp noted that the demand for the company’s Artificial Intelligence Platform (AIP) is “unlike anything we have seen in the past twenty years.
Palantir recently launched AIP, which allows large language models (LLMs) to operate within the confines of the enterprise and on privately held data.
“We are currently in discussions with more than three hundred additional enterprises to deploy AIP within their organizations, all of which are searching for an effective and secure means of adapting the latest large language models for use on their internal systems and proprietary data,” Karp added.
The AIP product has the potential to be “transformative” for Palantir, which has struggled to accelerate its revenue growth. The AIP represents a combination of Palantir’s machine learning (ML) technology and newly-developed LLMs. Still, investors will want to see how Palantir plans to monetize AIP with CEO Karp saying the company “will figure out how to monetize it [AIP].”
Karp noted that Palantir has spent two decades building similar platforms and has the needed knowledge and technical expertise to thrive in the AI-dominant era. The first version of AIP was made available to several strategic partners recently. It marks the fourth major product released by Palantir, after Gotham, Foundry, and Apollo,
“Our platform will be critical for allowing domain specific proprietary networks to integrate and metabolize publicly available information alongside privately held data,” he added.
Palantir reports its customer count rose 38% YoY and 8% QoQ. The company reported in early June that it was awarded a contract from the US Special Operations Command (USSOCOM), worth up to $463 million. The software company is tasked to develop solutions to support enterprise capabilities.
“Our partnership is an example of converting software innovation into real battlefield advantage. USSOCOM is at the forefront of adopting leading edge technology,” said Akash Jain, President, Palantir USG.
Just a few days later, the Department of Defense awarded three separate contracts to Palantir with a total value of approximately $110 million, including $58 million for a solution for Air Force headquarters.
Going forward, the focus will remain on Palantir’s ability to attract more customers and ultimately monetize its AI-focused AIP product. At one point, investors will want to see these AI investments being reflected in the results and guidance.
“Based on the strong performance and the AI arms race well underway, we continue to believe Palantir is the gold standard in AI,” Wedbush said.
The research firm recently initiated research coverage on Palantir with an Outperform rating and a $25 per share price target.
Summary
Palantir stock has managed to consolidate year-to-date (YTD) gains (+180%) despite a soft full-year revenue guidance. Investors were pleased to hear about robust demand for the recently-launched API, as well as the fact that the Board authorized a $1 billion stock buyback program.
Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.
