The data analysis company Palantir delivered such a huge third-quarter earnings report on Monday that its press release even bragged that the numbers were “crushing consensus expectations.”
Yet retail investors were lukewarm on the company on Tuesday, with the stock trading slightly down. That’s because Palantir’s enterprise sales, its big growth area, showed signs of slowing.
First, the good news for the company’s investors. Revenue grew 96% from a year earlier, and 20% from the previous quarter, to $2.31 billion, beating analysts’ expectations of $2.18 billion. It was the first time Palantir has topped $2 billion in a quarter. Palantir also reported adjusted earnings per share (profit per share, excluding certain one-time items) of 44 cents, compared with analysts’ expectations of 41 cents. The company even raised its revenue guidance, or forecast, for the full year. Normally, that alone would send a stock soaring.
The clincher was that Palantir’s U.S. commercial revenue surpassed U.S. government revenue for the first time ever. The company reported $984 million in commercial contracts (up 148% from the year-ago quarter), versus $953 million in U.S. government revenue.
The reason for all this love from enterprises? They are signing up for the company’s AI software that can run frontier models and custom-train open-weight models securely, without sharing any of their data and business processes with outside AI labs. Plus, Palantir has long offered what is today known as “forward-deployed” software engineering, in which its own engineers work directly with customers to customize the software.
However, Palantir also revealed a less-than-rosy signal: Even as enterprises are moving faster than ever, they are often signing short-term trials.
“What Ryan and I are seeing on the front line and commercial is this much quicker interaction, much quicker to deployment, shorter duration of the contract but then an ability to expand that contract dramatically,” CEO Alex Karp (pictured above) told Wall Street analysts on the quarterly earnings call.
Palantir is experiencing one of the unique phenomena of AI in the enterprise right now. Corporations are willing to quickly try AI software, skipping the usual bureaucracy, but they are also more willing to cancel contracts.
Karp used one off-color metaphor after another to describe how unconcerned he was about holding onto his enterprise business.
“We’ve gone from being the most attractive person in the physics department to being the captain of the football team, kind of thing,” he said, describing the influx of prospective corporate customers flowing in. “Conversely, you know, once you go Palantir, you don’t go back, and that’s just how it is, and you see it in our numbers.”
The numbers don’t yet confirm Palantir’s long-term success. While the company closed a hefty $1.46 billion of total contract value from U.S. enterprises in the quarter, that’s actually a decline from the record $2.13 billion in the previous quarter. That suggests slowing sales, at least in the most recent quarter.
The next earnings will show whether Palantir has solidified its role as a rising U.S. enterprise AI provider. Historically, many enterprises sign their biggest tech purchases in the final quarter of the year. Karp and his team certainly sound confident. They increased guidance for U.S. commercial revenue to be “in excess of $3.559 billion, representing a growth rate of at least 143%.”
Source: techcrunch.com
