Palantir Technologies (NYSE: PLTR) stock surged 12.2% in Monday's after-hours trading following the software-as-a-service (SaaS) company's release of its second-quarter 2024 results.
Investors' delight is attributable to the quarter's revenue and earnings both beating Wall Street's expectations, third-quarter revenue guidance also coming in ahead of the analyst consensus estimate, and management increasing its full-year 2024 outlook for revenue and a couple of other metrics.
Investors were also likely pleased that Palantir continues to grow its commercial business at a rapid pace. The company was originally focused on governmental agencies, so its heavy dependence on government spending made some investors uneasy.
Palantir Technologies' key numbers
| Metric | Q2 2023 | Q2 2024 | Change* |
|---|
| Revenue | $533 million | $678 million | 27% |
| GAAP operating income | $10 million | $105 million | 950% |
| Adjusted operating income | $135 million | $254 million | 88% |
| GAAP net income | $28 million | $134 million | 379% |
| Adjusted net income | $120 million | $221 million | 84% |
| GAAP earnings per share (EPS) | $0.01 | $0.06 | 500% |
| Adjusted EPS | $0.05 | $0.09 | 80% |
Data source: Palantir Technologies. GAAP = generally accepted accounting principles. Calculations by author except for revenue and adjusted EPS growth, which were provided by Palantir.
Investors should focus on the adjusted numbers because they exclude one-time items.
Wall Street was looking for adjusted EPS of $0.08 on revenue of $652.1 million, so Palantir beat both expectations. It also easily exceeded its own revenue guidance, which was for $649 million to $653 million.
Palantir generated cash of $144 million running its operations during the quarter, up 60% from the year-ago period. Its adjusted free cash flow was $149 million, up 55% year over year. The company ended the quarter with cash, cash equivalents, and short-term investments of $4.0 billion. It has no long-term debt.
What happened with Palantir in the quarter?
(All percentage growth figures are year over year.)
- Commercial revenue grew 33% to $307 million, accounting for 45% of total revenue.
- Government revenue grew 23% to $371 million, or 55% of total revenue.
- U.S. commercial revenue jumped 55% to $159 million.
- U.S. commercial customer count surged 83%.
- U.S. commercial remaining deal value soared 103%.
- U.S. government revenue grew 24%.
- The company closed 27 deals over $10 million.
- Customer count increased 41%.
What the CEO had to say
Here are a few key blurbs from CEO Alex Karp's letter to shareholders:
Our growth across the commercial and government markets has been driven by an unrelenting wave of demand from customers for artificial intelligence systems that go beyond the merely performative and academic.
Our flagship artificial intelligence platform (AIP) was launched just over a year ago. And it has already transformed our business.
And the persistent and unbridled demand for our software, for an effective enterprise platform that makes artificial intelligence capabilities useful to large institutions, shows no sign of relenting.
Guidance: Q3 outlook issued and annual outlook raised
Q3 guidance:
- Revenue of $697 million to $701 million. This equates to growth of 25% to 26% year over year.
- Adjusted income from operations of $233 million to $237 million. This equates to growth of 43% to 45% year over year.
Going into the release, Wall Street had been modeling for Q3 revenue of $679.1 million, so Palantir's guidance sprinted by this expectation.
Annual guidance:
| Metric | Prior 2024 Guidance | Current 2024 Guidance | Change Implied by Current Guidance* YOY |
|---|
| Total revenue | $2.677 billion to $2.689 billion | $2.742 billion to $2.750 billion | 23% to 24% |
| U.S. commercial revenue | Greater than $661 million | Greater than $672 million | Greater than 47% |
| Adjusted operating income | $868 million to $880 million | $966 million to $974 million | 53% to 54% |
| Adjusted free cash flow | $800 million to $1 billion | $800 million to $1 billion (no change) | 9% to 37% |
| GAAP operating income and GAAP net income | Both positive in each quarter | Both positive in each quarter (no change) | N/A. Both were positive in each quarter of 2023. |
Data source: Palantir Technologies. YOY = year over year. *Calculations by author except for U.S. commercial revenue growth guidance, which Palantir provided.
Going into the release, Wall Street had been expecting 2024 revenue of $2.7 billion, so the company's new guidance exceeded this estimate.
An AI stock worth considering buying or at least watching
In short, Palantir turned in a terrific quarter and guidance.
Palantir stock is worth considering buying or at least watching if you're an investor interested in a company in the AI space that's profitable and growing at a fast clip.
Shares are trading at 73 times projected 2024 earnings. This is a very high forward price-to-earnings (P/E) ratio, but it's not outrageous for the stock of a company that Wall Street estimates will grow earnings 32% this year and at an average annual rate of 85% over the next five years and that generates powerful free cash flows (FCFs). FCF regularly exceeds GAAP net income.
Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy .
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