Palantir Stock Gains on its First-Ever Quarterly Profit

Shares of Palantir (NYSE:PLTR) are trading higher this week after the U.S. data analytics firm reported better-than-expected Q4 2022 earnings and offered better-than-feared guidance.

Palantir reported adjusted earnings per share (EPS) of 4 cents in the quarter, topping the consensus estimates of 3 cents per share, according to Refinitiv. Revenue stood at $509 million in the three-month period, up 18% year-over-year, while analysts were expecting $502 million. Commercial revenue increased 12% YoY, the report showed.

As a result, Palantir stock has finally managed to stage a meaningful rally, as suggested by increased implied volatility in the options market (12.4%) heading into the earnings.

‘Spending Discipline’

More importantly, the software company reported a positive GAAP net income for the first time ever - $31 million.

“With this result, Palantir is profitable,” said Palantir CEO Alex Karp. “This is a significant moment for us and our supporters.”

Palantir said its U.S. commercial customer count grew 79% compared to last year, from 80 to 143. Going forward, Palantir forecast its first profitable year, adding it had slowed hiring efforts, slashed stock-based payouts, and trimmed cloud computing investments amid weaker client spending.

Karp believes that Palantir has a strong U.S. commercial business, adding it reflects the “unrelenting demand” from Palantir customers. Palantir generated $38 million from its commercial U.S. business in 2018, compared to $335 million in 2022.

When it comes to guidance, Palantir said it expects to generate revenue in the range of $503 million to $507 million in Q1 2023, and between $2.18 billion and $2.23 billion for the full fiscal year.

"As we look ahead to 2023, we will continue to exercise spend discipline...pace hiring while continuing to invest in high priority areas, including in our product offerings, building out our go-to-market strategy and technical roles," said finance chief David Glazer.

The company’s efforts to cut costs come on the heels of similar actions by tech giants such as Meta Platforms Inc (NASDAQ:META) and Google owner Alphabet (NASDAQ:GOOGL), which have laid off thousands of employees in recent months.

Meanwhile, Palantir executives voiced optimism over the artificial intelligence (AI) outlook, saying the emergence of ChatGPT hints at a bright future for the sector and would likely help the company’s business this year. Ryan Taylor, Palantir’s chief revenue officer, noted there are multiple ways the company can integrate its products with AI technologies like ChatGPT and apply them to its customer data.

Palantir shares had a difficult year in 2022 as a difficult macro environment weighed on unprofitable, high-growth stocks. Analysts at Bank of America recently discussed the 2022 selloff and outlook for this year.

“In our view, Palantir’s SPAC investments strategy seemed to be poorly timed and has not achieved its investment objectives thus far,” BofA analysts wrote in a client note.

Still, analysts reiterated a Buy rating come as Palantir’s SPAC-focused strategy shows its aggressive approach to sales, analysts said, with the bank expecting the company “to repeat another year of strong sales, as continued supply chain disruption and an increasingly expected recession calls for further operations optimization and data management. “

But analysts said they expect Palantir to achieve that growth through lower prices and margins as corporate software budgets continue to face headwinds.

Role in Ukraine

Earlier this month, Karp said Palantir is "responsible for most of the targeting in Ukraine," referring to the company’s collaboration with Kyiv since Russia’s invasion in February 2022.

Palantir spokesperson said the company’s software solutions help Ukraine target Russia’s tanks and artillery. These comments represent some of Karp’s and Palantir’s most direct yet on how the data analytics company is aiding Ukraine’s battle against Russia.

Karp was even the first global businessman to meet Ukrainian President Volodymyr Zelensky following Russia’s invasion last year, with the company even opening an office in Ukraine last summer.

Ukraine’s Vice Prime Minister Mykhailo Fedorov attended Palantir’s event in Switzerland last month, where he said the company’s technology enables real-time tracking of war developments. He added that the technology allowed Ukraine to gather information on Russia’s troop movements, helping it make important decisions such as the military’s next course of action.

Palantir has marketed this situational awareness software as a way to quickly pick and deploy the necessary resources, accumulating information from satellites and social media to determine the enemy’s position.

Palantir, known for its collaboration with the U.S. government recently inked a £75 million ($91.4 million) deal with Britain's Ministry of Defense.

Summary

Palantir stock is attracting some buying interest this week after the company’s fourth-quarter earnings report generated a positive investor reaction. The software company has also delivered its first-ever quarterly profit after reporting $31 million in net income, in what has been described as a “significant moment” for the military-focused business.

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Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.