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Palantir (PLTR) earnings report shows the enigmatic data software maker must grow its US business

15:32, 8 August 2022

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The Palantir Technologies logo seen at an event
US business is key for to the future, the latest Palantir (PLTR) earnings report shows. – Photo: Shutterstock

The latest Palantir earnings caused the data software company’s stock to fall on Monday after its business outlook came in below Wall Street expectations.

But executives on the second-quarter conference call said the company would be profitable by 2025 and that the lower guidance didn’t reflect the company’s opportunities or ambitions as business from the US broke the $1bn barrier.

On Monday Palantir Technologies (PLTR) stock fell by 10% in late-morning trading. Over the past year, the stock is down 39%.

Palantir Technologies (PLTR) stock price

“Palantir shares are trading down after guiding third-quarter and full-year revenue below consensus and the company’s long-term growth target of 30%,” William Blair analyst Kamil Mielczarek wrote in a research note obtained by Capital.com.

“We reiterate our Underperform rating and see downside over the next 12 months with the potential for the combination of multiple compression and estimate reductions.”

Founded in 2004 from the anti-money laundering operations of PayPal Holdings (PYPL) by Peter Thiel, Dr Alex Karp and others, Palantir has set its sights on becoming the data operating system for companies and industries.

Slide showing the range of Palantir's productsPalantir Technologies

It offers products such Gotham and Foundry to aggregate data from disparate sources and then analyses it to help organizations make better decisions.

The company takes its name from the “seeing stones” of JRR Tolkien’s Lord of the Rings books.

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Softer outlook

Despite a 26% year-on-year bump in revenue of $473m (£390m, €464m), Palantir reported second-quarter adjusted net loss per share of 1 cent. Analysts had been expecting adjusted earnings of 3 cents, according to figures widely available on financial news sites.

Slide showing Palantir's future earnings guidancePalantir Technologies

For its current third quarter, the company said it expects revenue of $474m to $475m and operating income of $54m to $55m, which is lower than analyst revenue estimates of $500m and $145m for operating income.

In his note, the William Blair analyst noted that this was the company’s second consecutive guidance reduction. Declining margins have resulted in both second-quarter adjusted EBITDA and adjusted operating profit declining relative to last year.

“Across government and commercial [business lines] the opportunity in front of us is enormous which makes the revised near-term outlook all the more disappointing,” Palantir COO Shyam Sankar told investors and analysts on a conference call that at times sounded closer to a self-help audiobook than a corporate update.

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“It doesn’t come close to representing our ambition and the opportunity before us.”

Answering an investor question on the call, CEO Dr. Alex Karp said that his company would be profitable by 2025.

Update from Palantir CEO Dr. Alex Karp

Palantir's enigmatic polymath CEO Dr. Alex KarpPalantir Technologies

Palantir’s Karp, unlike other tech CEOs, actually gives periodic updates on the company and comments on world events in the form of regular letters to shareholders.

The enigmatic polymath is a former financier fluent in French and German who holds a PhD in social theory from a leading German university.

In his latest shareholder letter, Karp outlines how “a new company is emerging” at Palantir as trailing 12-month revenue from the US broke the $1bn barrier for the first time.

Slide showing the growth in US revenue for PalantirPalantir Technologies

“The strength and momentum we are seeing with our customers in the US is a reflection of the refinement and maturation of our software platforms, which we believe will continue leading to increasingly broad adoption across sectors,” Karp wrote.

“We anticipate that the proportion of our revenue coming from customers based in the US will continue to rise, even as our growth in Europe and other international markets accelerates.”

William Blair’s Mielczarek, however, cautions that the company is still vulnerable to economic factors that could impact new business.

“While sales investments, modularisation, and product expansion have the potential to accelerate growth, revenue growth rates excluding strategic investments have decelerated below 20% and total revenue growth could fall to similar levels if macroeconomic headwinds push out new contract wins,” the analyst wrote.

 

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
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