Palantir Slides After Annual Sales Forecast Fails to Impress

07/05/2024

A Palantir logo at a pop-up store ahead of the World Economic Forum (WEF) in Davos, Switzerland, on Saturday, Jan. 13, 2024. The annual Davos gathering of political leaders, top executives and celebrities runs from January 15 to 19.

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

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, on average, estimated $846.6 million, according to data compiled by Bloomberg.

The stock tumbled as much as 11% in extended trading after closing at $25.21 in New York. The company has been 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.

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

Still, the company reported faltering efforts in its bid to sell overseas. Palantir’s international commercial business declined 3% sequentially during the quarter as a result of continued headwinds in Europe and a previously noted revenue catch-up during the fourth quarter, executives said on a conference call after the results were released.

“We do have headwinds in Europe,” which contributes 16% of the company’s business, Karp said during the call. “Europe is gliding toward 0% GDP growth over the next couple of years. That is a problem for us. There is no easy remedy for that.”

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. The Denver-based company credits those events for increasing US commercial customers by 69% to 262 during the first quarter. Revenue growth from government contracts is now increasing 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.

(Updates with comments from conference call in the fifth paragraph.)

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