Palantir Technologies stock skyrocketed over 25% in premarket trading Tuesday after the data analytics provider reported better-than-expected fourth quarter results driven by strong demand for its AI platforms. The company also issued an upbeat profit forecast for full-year 2023, predicting robust growth will continue.
Q4 Financial Results Exceed Expectations
For the fourth quarter ended December 31, 2023, Palantir posted adjusted earnings per share of $0.16, well above Wall Street estimates of $0.04. Revenue jumped 22% year-over-year to $509 million, surpassing expectations of $502.6 million.
The company benefited from a 53% surge in commercial revenue in Q4 to $205 million as more customers adopted its Foundry data analytics platform. Government revenue also grew a solid 15% to $304 million.
On a GAAP basis, Palantir earned $0.04 per share. This marks the fifth consecutive quarter of GAAP profitability for the company.
Full year 2023 revenue climbed 26% year-over-year to $1.9 billion. The company reported net income of $347 million, a major turnaround from a loss of $520 million in 2022.
| Financial Metric | Q4 2023 | Change YOY | FY 2023 | Change YOY |
|---|---|---|---|---|
| Revenue | $509M | +22% | $1.9B | +26% |
| Adj. EPS | $0.16 | +220% | $0.47 | +525% |
| Net Income | $82M | Positive vs Loss | $347M | Positive vs Loss |
Surging Demand for AI Capabilities
Palantir benefited from unrelenting customer demand for its AI-enabled data analysis platforms in the fourth quarter. The company is seeing accelerated adoption of its Foundry product as more organizations seek ways to leverage AI to uncover insights from their data.
Government revenue growth was driven by rising demand from defense and intelligence agencies for Palantir’s Gotham analytics platform. Commercial revenue growth stemmed from wider Foundry adoption in industries like healthcare, manufacturing, and aerospace where AI tools can boost efficiency and decision-making.
During the quarterly earnings call, CEO Alex Karp touted Foundry as reaching an “inflection point” and stated that “the value of enterprise AI has become axiomatic for most executives.” He cited numerous customer expansions and highlighted AI use cases in predictive analytics and intelligent process automation.
To support surging Foundry demand, Palantir has been investing heavily in its AI capabilities like model building, data labeling, and integrated workflows. These efforts are paying off with higher customer adoption and revenue growth quarter after quarter.
Significant Margin Expansion
In addition to strong top line growth in Q4, Palantir also delivered a substantial expansion in profit margins. Its adjusted operating margin jumped from 17% to 31% over the year as economies of scale began to kick in on the operational side.
On the earnings call, CFO David Glazer said higher margin was driven by greater revenue per customer and improved efficiency in product development and customer delivery. He forecast further margin expansion going forward due to a “durable economic model.”
Upbeat 2023 Outlook on AI Momentum
Buoyed by the strong momentum exiting 2022, Palantir issued an upbeat outlook for continued profitable growth in 2023. The company guided for $2.18 billion in revenue this year, representing 15% growth over 2022. It expects $760 million in adjusted operating income, 55% higher than last year.
During the quarterly call, Glazer stated “the demand environment has never been stronger” as existing clients scale their use of Foundry and Gotham while new customers come onboard seeking AI capabilities. Management sees the total addressable market expanding rapidly.
Karp summed up the bullish outlook, saying: “Our products have never been better, demand has never been stronger, our opportunity has never been larger, and we have never been more ready.” He foresees Palantir playing a key role in the AI revolution over the next decade across industries.
| 2023 Outlook | Prior Outlook | Change |
|---|
| Revenue | $2.18B | $1.9-2.0B | +15% growth at midpoint
| Adj. Op Income | $760M | $650-700M | +17% at midpoint
Wall Street Cheers Results
Wall Street analysts were very encouraged by Palantir’s fourth quarter beat and strong 2023 guidance centered around booming demand for its AI offerings.
Morgan Stanley analyst Keith Weiss commented: “Results show Palantir is emerging on other side of heavy investment cycle with accelerating growth and margins.” He sees Palantir gaining share in a $100 billion addressable market, and raised his price target on the stock.
William Blair analyst Kamil Mielczarek stated: “The quarter had it all – substantial outperformance on every key metric, evidence of operating leverage, record net new customer adds, ASP expansion, and raised guidance.” He believes Palantir has reached an inflection point commercially thanks to the value created by its AI platforms.
Key Takeaways
- Palantir delivered better-than-expected Q4 results, posting 22% revenue growth and 31% adjusted operating margins
- Growth was driven by surging demand for Palantir’s AI-enabled platforms Foundry and Gotham
- Commercial revenue expanded 53% in Q4 as more enterprises adopt Foundry for AI use cases
- Company issued strong full-year 2023 guidance calling for 15% revenue growth and 55% growth in adjusted operating income
- Stocks surged 25%+ in reaction as Wall Street grows confident in momentum around AI product demand
- Palantir sees massive long-term potential from AI revolution across industries
With Foundry reaching mainstream adoption and Gotham seeing rising defense demand, Palantir looks poised to continue capitalizing on the growing appetite for enterprise AI. Its platforms have become mission-critical for enabling customers to maximize business insights. As AI capabilities expand, Palantir’s first-mover advantage positions it well to consolidate leadership in the data analytics industry.
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