Palantir announced strong third-quarter financial results on Monday, even referring to these figures as "far exceeding market expectations" in their press release.
However, retail investors reacted indifferently to the company on Tuesday, with the stock price falling slightly. The reason is that there are signs of a slowdown in Palantir's most important area of growth – corporate sales.
First, let's look at the good news for investors. The company's revenue increased by 96% year-over-year, reaching $2.31 billion, surpassing the $2 billion mark for the first time. Palantir Revenue also grew by 20% compared to the previous quarter, exceeding analysts' expectations of $2.18 billion. The company's adjusted earnings per share were $0.44, which is also higher than analysts' forecast of $0.41. Palantir The company has also raised its full-year revenue forecast. Usually, this alone would be enough to drive a significant increase in the stock price.
More importantly, Palantir's U.S. commercial revenue exceeded that of the U.S. government for the first time. The company reported that its commercial contract revenue was $984 million, a year-on-year increase of 148%; whereas the U.S. government's revenue was $953 million.
Why do companies favor this company so much? It's because they are signing up to use the AI software from Palantir. This type of software is capable of running cutting-edge models and can safely customize and train open-source weight models without the need to share their own data and business processes with external AI laboratories. In addition, Palantir has long provided what is now known as "frontline deployment" software engineering services, helping customers to customize their products.
However, Palantir also revealed a less optimistic signal: although companies are acting faster than before, they tend to sign short-term trial contracts.
"What we, Ryan and I, have observed on the front lines with commercial clients is that the interaction speed is much faster, the deployment speed is much faster, and the contract durations are shorter. However, there is also the capability to significantly expand these contracts later on," CEO Alex Karp told Wall Street analysts during the quarterly teleconference.
Palantir is currently experiencing a unique phenomenon in the field of AI. Enterprises are willing to quickly try AI software, bypassing the usual bureaucratic processes, but they are also more inclined to cancel contracts.
When describing his lack of concern about retaining corporate business, Karp used several rather unrefined metaphors in a row.
“We’ve gone from being the most attractive candidates in the physics department to becoming the captain of the football team; that’s more or less what it means,” he said, describing the continuous influx of potential corporate clients. “On the other hand, once you use Palantir, you won’t look back again; that’s a fact, and you can also see this from our data.”
However, these figures still cannot prove the long-term success of Palantir. This quarter, the company secured a total contract value of $1.46 billion from corporate clients in the United States, which is actually lower than the record $2.13 billion in the previous quarter for corporate TCV. This indicates that, at least in the last quarter, the sales growth rate is slowing down.
The next financial report will show whether Palantir has consolidated its position as an emerging supplier to the American company AI. Historically, many companies tend to make their largest technology purchases in the last quarter of the year. Karp and its team are clearly very confident about this. They have raised their revenue forecast for the U.S. market to “over $3.559 billion, representing a growth rate of at least 143%.”
