Palantir Technologies delivered second-quarter earnings that topped estimates while revenue handily beat Wall Street targets. Palantir stock jumped as September quarter guidance came in well above expectations amid a market rotation out of the technology sector, especially artificial intelligence plays.
"As it was with the (California) gold rush, the real benefactors were the entrepreneurs that supported the rush," said Bank of America analyst Mariana Perez Mora, in a report. "This is where we continue to see PLTR's ultimate benefactor — the entrepreneur - the digital axe supplier that is still standing tall now that the AI tourists have started to depart."
The software maker reported earnings after the market close on Monday. On the stock market today, Palantir stock popped 10.4% to close at 26.59.
For the quarter ended June 30, Palantir earnings using generally accepted accounting principles, or GAAP, were 9 cents a share, up 80% from a year earlier. Revenue rose 27% to $678 million, the software maker said.
Analysts had predicted Palantir earnings of 8 cents a share on revenue of $653 million.
Palantir Stock: U.S. Government Drives Beat?
Denver-based Palantir said government revenue rose 23% to $371 million, topping estimates of $349 million in sales. In addition, commercial revenue rose 33% to $307 million, topping estimates of $306 million. Further, U.S. commercial revenue jumped 55% to $159 million.
At Deutsche Bank, analyst Brad Zelnick commented on the Q2 revenue beat in a report.
"Revenue upside vs. Street in the quarter was entirely driven the government segment, particularly its U.S. government business which benefited from favorable timing on several large deals that closed earlier than anticipated."
In a letter to shareholders, Chief Executive Alex Karp said: "Our customer count in the U.S. commercial market grew 83% year-over-year, from 161 in Q2 2023 to 295 in Q2 2024, and now accounts for half of all of our customers."
For the current quarter ending in September, Palantir says it expects revenue in a range of $697 million to $701 million. Analysts had predicted sales of $681 million.
Also, Palantir hiked 2024 revenue guidance by roughly 2% to between $2.742 billion and $2.750 billion.
Among AI Stocks To Watch
Heading into the Palantir earnings report, shares were up 40% in 2024. Palantir stock hit a 52-week high of 29.83 on July 18. Further, Palantir stock has outperformed since 2023 amid buzz over generative artificial intelligence technology.
Also, Palantir rolled out its "Artificial Intelligence Platform" in early 2023. Palantir is among AI stocks to watch.
"As management highlighted on the call, the challenge facing customers remains moving AI projects from prototype, which they address with their AI Bootcamps, to value adding production workloads, which (Palantir feels) their ontology uniquely positions them to do," said Zelnick at Deutsche Bank. "That is the opportunity and will be key to converting new customer momentum to sustained revenue expansion in the face of competition from a long list of well-established software vendors and in-house IT teams moving up the AI learning curve."
Meanwhile, big cap tech Magnificent 7 stocks have pulled back as investors question how long AI investments will take to pay off.
Palantir has already mined the AI opportunity with government customers for intelligence gathering, counterterrorism and military purposes. Now Palantir aims to use generative AI to spur growth in the commercial market. The software maker has expanded into health care, energy and manufacturing.
Palantir Stock: Bearish Views Persist
Despite the Q2 beat, bearish views on Palantir stock continue.
"While the Q2 results are encouraging, we continue to believe PLTR needs to consistently demonstrate stronger execution and growth in order to justify a notably higher valuation," said Mizuho analyst Gregg Moskowitx in a report. "Given the inherent lumpiness of this business, we believe that will likely be challenging."
At RBC Capital, analyst Rishi Jaluria said in a report: "We question how aggressive full-year guidance has been set."
Brian White, analyst at Monness, Crespi, Hardt and Co., maintains a sell rating on Palantir stock. "This 19-month gen AI insanity has driven Palantir to what we view as an absurd valuation," he said in a report. "Given the exorbitant number of shares outstanding, we believe it will take several years for Palantir to grow into its current valuation."
Further, William Blair analyst Louie DiPalma said in a report that Palantir did not disclose how much Q2 came from special-purpose acquisition companies.
"The company previously guided for revenue from SPAC customers of between $7 million and $9 million," he said. "SPAC revenue upside may have played a role in U.S. commercial revenue accelerating."
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
