The December quarter earnings season has been strong for companies leveraging generative artificial intelligence software. Microsoft, IBM, ServiceNow, Amazon, and Meta all posted impressive results, thanks at least in part to AI.
Palantir, which has made a big AI bet of its own, will attempt to be added to that list when it reports fourth-quarter financial results after the close of trading on Monday.
For the quarter, Palantir’s guidance calls for revenue of between $599 million and $603 million, with adjusted income from operations of between $184 million and $188 million. Street consensus estimates as tracked by FactSet call for revenue of $603 million, $187 million in operating revenue, and adjusted profit of 8 cents a share.
A provider of data analytics software, Palantir is probably best known for its work for U.S. and foreign governments, but it is seeing higher growth from commercial customers. Street estimates anticipate fourth quarter government revenue of $333 million, up 13.6%, with commercial revenue of $271 million, up 26.1%.
Palantir’s strong third quarter results were powered by better-than-expected 23% growth, to $251 million, in commercial revenue, including 33% growth in U.S. commercial revenue, to $116 million.
CEO Alex Karp told Barron’s in November the U.S. commercial business—propelled by strong demand for the AI-powered version of its software—should hit a $1 billion run rate by the 2025 first quarter, more than doubling from the third quarter of 2023.
For some investors, buying Palantir shares carries political overtones. Originally funded in part by In-Q-Tel, the CIA’s venture capital arm, the company has remained a vocal supporter of the U.S. military. In 2020, Palantir moved its headquarters to Denver from Palo Alto, due partly to the conviction its business focus didn’t fit in Silicon Valley.
Karp also has been outspoken in his support of the Israeli military—a Palantir customer—in its current war with Hamas in Gaza.
Palantir has a huge following among retail investors—and welcomes that interest. It is one of the few companies that takes questions on its earnings call from individuals who submit them online, and not just from Wall Street equity analysts.
That complex dynamic has helped boost Palantir’s valuation. The stock trades at 57 times the Street’s consensus forecast for 2024 profit of 29 cents a share, and about 14 times the Street’s forecast for 2024 revenue of $2.6 billion. That implies about 19% growth from an expected $2.2 billion in revenue for 2023.
Citi analyst Tyler Radke, who has a Sell rating on Palantir shares, writes in a note previewing the quarter he is incrementally cautious ahead of the report, anticipating that underwhelming federal deal activity in the quarter will offset strength in U.S. commercial. Radke sees downside risk given the high valuation for just teens top-line growth.
Palantir shares have rallied 84% over the last 12 months, but the stock is off 4% so far this year.