Software company unexpectedly reports GAAP profit again while topping revenue expectations, with CFO calling out ‘massive potential’ related to AI opportunities
Palantir Technologies Inc. delivered a surprise profit for the second quarter in a row Monday, while also topping revenue expectations, sending shares more than 20% higher in after-hours trading.
The software company reported first-quarter net income of $17 million, or 1 cent a share, whereas Palantir (PLTR) posted a loss of $101 million, or 5 cents a share, in the year-earlier quarter. Analysts tracked by FactSet were expecting a loss of a penny a share on a GAAP basis. The stock closed with a 4.7% gain at $7.76 in Monday’s regular session, then rose to $9.40 in heated after-hours action.
Palantir posted its first-ever quarter of GAAP profitability three months ago, and management expects the company to do so in each remaining quarter of 2023.
Chief Financial Officer David Glazer told MarketWatch in an interview that momentum in the U.S. commercial business, coupled with “disciplined” expense controls and continued management of stock-based compensation helped drive the profit.
The company posted adjusted earnings per share of 5 cents, while analysts were modeling 4 cents a share.
Revenue rose to $525 million from $446 million, while analysts were modeling $506 million. Though government revenue of $289 million matched analyst expectations, Palantir’s $236 million in commercial revenue exceeded the consensus view, which was for $217 million.
U.S. commercial revenue was up 26% to $107 million.
“Our momentum and growth in the United States continues and reflects the speed with which American institutions are capable of embracing new technology,” Chief Executive Alex Karp said in a shareholder letter.
Palantir executives also called out benefits related to the growing interest in the development of artificial intelligence technologies.
“It has now become increasingly apparent that a platform that combines the capabilities of a foundational software architecture with those of the latest large language models is essential in order for the models to involve into something of transformational value for large organizations,” Karp said in his letter.
Chief Revenue Officer Ryan Taylor told MarketWatch that the “challenge” of “how you apply AI to enterprise data” resembles Palantir’s broader work helping companies deal with large-scale sets of data. There has been “huge demand from customers reaching out [and] wanting to adopt solutions.”
Executives expect $528 million to $532 million in revenue for the second quarter. The FactSet consensus was for $537 million.
For the full year, Palantir’s management now expects $2.185 billion to $2.235 billion in revenue, whereas the company’s prior forecast was for $2.18 billion to $2.23 billion, and analysts were expecting $2.201 billion.
Glazer said that Palantir was “excited about where things are,” particularly in the U.S., and he also called out “this massive potential for the AI opportunities sitting in front of us.”
He further discussed recent changes by S&P Dow Jones Indices that will now allow companies with multiple share classes into its indexes, like the S&P 500 . Palantir has multiple share classes.
There are still other requirements for inclusion into the S&P 500, such as four quarters of GAAP profitability, GAAP profitability in the most recent quarter, and a market-cap threshold, but Glazer said Palantir is “excited that if we execute we could be well-positioned.”