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Palantir Slides After Annual Sales Forecast Fails to Impress

In Business
May 07, 2024

(Bloomberg) — Palantir Technologies Inc. shares slid in extended trading on Monday as the market was unimpressed by the company’s outlook for annual sales after the stock has already tripled in the past year.

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The company nudged its annual revenue forecast slightly higher to a range of $2.68 billion to $2.69 billion. Analysts expected $2.68 billion, on average, according to data compiled by Bloomberg. The company raised its outlook for adjusted operating income to a range of $868 million to $880 million. Analysts had expected $846.6 million.

The stock tumbled 10% in extended trading in New York. Palantir is one of the marquee stocks of the tech world’s current AI frenzy, with new products helping to catapult it more than 200% over the last 12 months.

Co-founded by Peter Thiel, Palantir develops software and analysis tools for companies and government agencies allied with American interests. Palantir’s roots are in government sales — the venture arm of the US Central Intelligence Agency was among its initial backers — but “unbridled and growing demand” from US businesses for its artificial intelligence software now drives the business, Chief Executive Alex Karp told shareholders in a letter.

Palantir sells its AI software through boot camps, an engineer-led strategy to get customers up and running in just a few days instead of months and what the company credits for increasing US commercial customers by 69% to 262 during the first quarter. Revenue growth from government contracts is now growing at a slower pace than commercial revenue and analysts expect commercial sales to eclipse those from governments next year.

Palantir reported $335 million in government revenue in the first quarter, up 16%, and $299 million in commercial revenue, a 27% increase from a year earlier.

“Palantir’s commercial segment saw another strong quarter with 40% growth in the US, but gains are likely to taper” in the second half at this business and the government unit,” Bloomberg Intelligence analyst Mandeep Singh wrote in a research note. Billings growth of 2% in the first quarter “suggests a lack of pipeline visibility, even with commercial’s solid customer additions.”

The company posted sales of $634.3 million for the three months ended March 31, up 21% from a year earlier. Analysts had estimated $615.8 million in sales, according to data compiled by Bloomberg. Net income was $106 million, its largest quarterly profit ever, far surpassing the average estimate for $83 million. Palantir reported its first profitable year in 2023.

In the current quarter, Palantir said it expects revenue of $649 million to $653 million and adjusted income from operations of $209 million to $213 million.

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