One of the most intriguing players to emerge in the era of artificial intelligence (AI) is Palantir Technologies (PLTR 1.51%).
Palantir reported results after the market close on Monday, and to say it crushed expectations might be an understatement.
The underlying deals that fueled the results were also eye-opening, as Palantir inked 129 deals worth at least $1 million.
When RPO is outpacing current revenue growth, it provides insight into future potential, suggesting its growth spurt has further to run.
Recall that between early 2021 and late 2022, Palantir stock shed as much as 83% of its value.
In the age of artificial intelligence (AI), Palantir Technologies (PLTR 1.51 percent) is one of the most interesting new players. The business has already established a solid reputation in the intelligence and defense sectors and has been putting forth a lot of effort to demonstrate its worth to enterprise-level companies. Palantir has gained over 900 percent in the last two years, bringing those goals into focus. The corresponding rise in its value has sparked concern and heated discussion in Wall Street circles.
To say that Palantir’s results, which were released after the market closed on Monday, exceeded expectations would be an understatement. The business not only easily exceeded projections, but management’s advice indicates that its growth will only pick up speed.
Let’s examine what led to Palantir’s strong performance and what lies ahead.
AI’s poster child.
Palantir’s revenue for the fourth quarter was $828 million, up 14% from the previous quarter and 36% from the previous year. As a result, adjusted earnings per share (EPS) increased by 75% to $0.14. Palantir easily met Wall Street’s already high bar, as analysts’ consensus estimates called for revenue of $782 million and EPS of $0.11 to put the results in perspective.
U was responsible for the outcomes. S. . Commercial revenue soared 20 percent sequentially and 64 percent year over year, significantly exceeding management’s forecasted growth of at least 50 percent. The U. A. The government segment responded to the call as well, and revenue increased by 45%.
Customer metrics supported the company’s strong performance. Driven by a 73 percent increase in U.S. customers, Palantir’s customer base increased 43 percent year over year. A. business clients. With 129 deals worth at least $1 million signed by Palantir, the underlying transactions that drove the results were also startling. Of them, 32 were valued at at least $10 million, and 58 were valued at at least $5 million.
It is noteworthy that a large number of these contracts are also contributing to the establishment of future financial gains. The business’s remaining performance obligation (RPO), or sales that haven’t been recorded as revenue, increased by 40% annually to $1.73 billion. When RPO exceeds current revenue growth, it indicates that its growth spurt may still be ongoing and offers insight into future potential.
The Artificial Intelligence Platform (AIP) of Palantir is the catalyst for the company’s explosive growth and is transforming how companies use AI to their advantage. Utilizing a unique strategy, the company hosts boot camps that pair users with Palantir engineers to assist them in integrating AI into mission-critical tasks, “going from zero to use case in five days or less.”. It has been a very successful tactic.
what might occur in the future.
At the halfway point of its guidance, Palantir projected full-year revenue for 2025 of $3.75 billion, representing a 31% year-over-year growth. The United States is the primary source of its optimistic outlook. S. AIP is part of the commercial segment, for which management is now projecting growth of 54%, up from 50% growth just the previous quarter.
Regarding AI, Palantir CEO Alex Karp wrote in a letter to shareholders, “We are still in the earliest stages, the beginning of the first act, of a revolution that will play out over years and decades.”. “.
Palantir is operating at full capacity, as the data makes abundantly evident. Nonetheless, Wall Street has joined the chorus of investors who fear the stock has lost its way. Just three of the 22 analysts who provided an opinion in February gave it a buy or strong buy rating, 13 gave it a hold rating, and the remaining six gave it a sell or underperform rating. It is almost universal for Palantir’s biggest skeptics to base their bearish calls on the stock’s valuation.
A brief examination of the figures helps to explain why. At the moment of writing, the stock is selling for 412 times earnings and 75 times sales, which is absolutely incredible. However, when evaluating high-growth stocks, the most popular valuation metrics frequently fail to meet expectations. When using the more suitable forward price/earnings-to-growth (PEG) ratio, which takes Palantir’s rapid growth into account, it comes out at 0:38. Any value below 1 indicates that the stock is cheap.
Nevertheless, Palantir will remain volatile due to its high valuation, and if the company fails to meet investors’ high expectations, whether actual or perceived, the stock could plummet. It should be noted that Palantir stock lost up to 83% of its value between early 2021 and late 2022.
Global management consulting firm McKinsey and Company projects that the generative AI market will be valued between $26 trillion and $44 trillion over the next ten years. The stock price may be significantly higher in ten years if Palantir can successfully negotiate the rough waters of AI adoption and continue to carve out a lucrative niche for itself, but there will probably be many obstacles in the way.