Palantir Technologies is on an epic run. Sales growth has accelerated every quarter since the third quarter of 2023, capped by a 93% expansion in the second quarter this year. And the software maker was also very profitable, with a 47% operating margin in the period.
After every quarter, the question is, "How do they top it?" and so far the company has been able to. But Wall Street predicts that the peak for sales growth and operating margin was in the second quarter, and that both began to decline in the latest quarter.
When Palantir reports its third-quarter earnings on Monday afternoon, analysts expect 84% sales growth for its first quarter over $2 billion, coupled with a 46% operating margin.
Palantir software takes the flood of data organizations produce, and uses artificial intelligence to make sense of it, surface hidden connections, and aid in decision-making. Palantir's roots are in U.S. intelligence and defense work, but its software is used throughout federal government departments, as well as with state and local customers. These sales are seen growing by 76% in the third quarter.
But the bigger driver over the last couple of years is U.S. commercial sales, which have shown triple-digit growth four quarters in a row now, with a fifth projected to be announced on Monday. Analysts are looking for 133% revenue growth, down from 150% last quarter.
The segment has been outgrowing the rest of the company for a while now, and it's expected to account for 42% of total sales in the quarter, up from 24% in 2024.
But outside the U.S., Palantir's voluble CEO Alex Karp has become a lightning rod and it has made the company a political football. Analysts project relatively modest international sales growth of 26% in the third quarter.
Analysts may be banking on a slowdown, but Palantir has beaten Wall Street revenue expectations for three years running, and by an average of 6.6% in the last five quarters. Analysts have been in a constant state of catching up with Palantir's fundamentals.
The flip side of Palantir's high growth and margin is its valuation. The company has a committed corps of retail investors who are ready to buy into price dips in the stock, and in concert with the financial performance, it trades at very high multiples -- 86 times its projected earnings per share for the next 12 months.
In any case, expect fireworks after the earnings report. Over the last 20 quarters, Palantir stock has moved by an average of 16% the following day, including a 29.5% jump after last quarter.
Comments