EPS of $0.01 decreased by 115.1% from previous year
Gross margin of 80.0%
Net income of 28.13M
""The convergence of AI technologies has remade Palantir, taking Palantir away from its terminal value being it made the world better by making our institutions in the West stronger..." - Alex Karp, CEO" - Alex Karp
In Q2 2023, Palantir Technologies Inc (PLTR) reported robust financial performance, achieving $533 million in revenue which marks a 13% year-over-year increase. This also reflects a consistent upward trend as the company maintains its trajectory toward profitability, for the third consecutive quarter, with a GAAP net income of $28 million. CEO Alex Karp emphasized the significant opportunity presented by advancements in AI technology, particularly their new AI Platform (AIP), which has garnered unprecedented interest from clients across diverse sectors. This positioning allows Palantir to aim for substantial growth and enhances its potential for inclusion in the S&P 500 after the upcoming results.
Key Performance Indicators
Revenue
533.32M
QoQ: 1.55% | YoY:12.75%
Gross Profit
426.42M
79.96% margin
QoQ: 2.13% | YoY:15.00%
Operating Income
10.07M
QoQ: 144.81% | YoY:-124.13%
Net Income
28.13M
QoQ: 67.40% | YoY:-115.68%
EPS
0.01
QoQ: 65.00% | YoY:-115.12%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $533 million, up 13% YoY, up 2% QoQ
- Significant contributions from U.S. commercial segment with 20% YoY growth and expansion in customer base.
**Net Income:** $28 million, marking profitability for three quarters in a row.
**Operating Income:** $10 million, reflecting an operating margin of 1.9%.
**Adjusted Gross Margin:** 81% for the quarter, underscoring efficient cost management.
**Customer Base Growth:** 421 total customers, growing 38% YoY, with a significant uptick in large-cap accounts.
- Management indicated a strong pipeline with $3.4 billion total deal value, highlighting demand across multiple sectors.
Karp noted, "The convergence of AI technologies has remade Palantir... we see a market that is hungry to apply AI to transform our businesses."
Financial Highlights
Key Financial Metrics:
- Revenue: $533 million, up 13% YoY, up 2% QoQ
- Significant contributions from U.S. commercial segment with 20% YoY growth and expansion in customer base.
- Net Income: $28 million, marking profitability for three quarters in a row.
- Operating Income: $10 million, reflecting an operating margin of 1.9%.
- Adjusted Gross Margin: 81% for the quarter, underscoring efficient cost management.
- Customer Base Growth: 421 total customers, growing 38% YoY, with a significant uptick in large-cap accounts.
- Management indicated a strong pipeline with $3.4 billion total deal value, highlighting demand across multiple sectors.
Karp noted, "The convergence of AI technologies has remade Palantir... we see a market that is hungry to apply AI to transform our businesses."
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
533.32M
12.75%
1.55%
Gross Profit
426.42M
15.00%
2.13%
Operating Income
10.07M
-124.13%
144.81%
Net Income
28.13M
-115.68%
67.40%
EPS
0.01
-115.12%
65.00%
Key Financial Ratios
currentRatio
5.22
grossProfitMargin
80%
operatingProfitMargin
1.89%
netProfitMargin
5.27%
returnOnAssets
0.71%
returnOnEquity
0.95%
debtEquityRatio
0.08
operatingCashFlowPerShare
$0.04
freeCashFlowPerShare
$0.04
priceToBookRatio
11.05
priceEarningsRatio
290.39
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key Insights from Management:
- AI Platform (AIP) Launch: "We launched AIP just 10 weeks ago and already we’re seeing unprecedented inbound interest," said Ryan Taylor, illustrating the transformative potential of the new offerings.
- Customer Engagement: Health and transportation sectors demonstrated remarkable growth—Healthcare revenue increased by 93% Year-over-Year.
- Market Positioning: Karp stated, "We aim to be the most valuable enterprise software company in the world", indicating strategic alignment with evolving market needs around AI.
- Government Contracts: Despite some fluctuations, revenue from government contracts grew 15% YoY, with key contracts secured, including a multi-year deal with U.S. Special Operations Command valued at $463 million.
"The convergence of AI technologies has remade Palantir, taking Palantir away from its terminal value being it made the world better by making our institutions in the West stronger..." - Alex Karp, CEO
— Alex Karp
"We remain focused on aggressively capitalizing on this momentum by driving compounding growth of AIP usage." - Ryan Taylor, Chief Revenue Officer
— Ryan Taylor
Forward Guidance
Management expects continued growth driven by the AIP rollout and increased customer engagement across industries. Looking beyond Q2, projected revenues for Q3 are anticipated to fall between $553 million and $557 million, with adjusted income from operations set for $135 million to $139 million. The company also plans to increase its investments in AIP while maintaining profitability, advising investors to remain vigilant on upcoming developments that could reinforce their market standing as they work towards S&P 500 inclusion. Karp stated, "Profitability, stability, move to S&P are all linked to how we invest in our core offerings."
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
PLTR Focus
79.96%
1.89%
0.95%
290.39%
PANW
71.80%
1.29%
11.60%
142.39%
ADBE
88.10%
33.70%
8.73%
38.58%
CRWD
75.00%
-2.10%
0.46%
1,134.94%
SQ
33.70%
-2.39%
-0.69%
-82.42%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given Palantir's strong Q2 results, expanding market presence, and strategic focus on AI capabilities through AIP, the company's outlook appears favorable for both growth and stability. Investors should consider the company's solid cash position and commitment to continued profitability. However, they should also remain aware of the inherent risks associated with government contracts and competitive pressures. As Palantir advances toward potential S&P 500 inclusion, enhanced valuation metrics, combined with ongoing innovations, support a compelling investment thesis.
Key Investment Factors
Growth Potential
Palantir is strategically positioned to capitalize on the AI revolution with products designed for integration across enterprises. The launch of AIP is expected to drive compounded growth in customer usage and revenue, as demand accelerates.
Profitability Risk
Risks include reliance on large government contracts, which can be variable in timing. There is also competitive pressure from other technology providers ramping up their AI capabilities, potentially impacting customer acquisition.
Financial Position
Palantir's balance sheet remains strong with $3.1 billion in cash and equivalents, providing ample liquidity to fund new product development and potential expansion initiatives.
SWOT Analysis
Strengths
Strong cash position with over $3 billion liquidity.
Three consecutive quarters of GAAP profitability, indicating improved operational efficiency.
Rapid customer growth and diversification across various sectors.
Weaknesses
High dependence on government contracts that can fluctuate.
Earnings growth remains volatile and can be affected by strategic customers' engagements.
Opportunities
Significant growth potential in AI and machine learning adoption in multiple sectors, including healthcare and transportation.
Expected inclusion in S&P 500 could improve market visibility and stock performance.
Threats
Intense competition from both established companies and new entrants in the AI space.
Market volatility and regulatory scrutiny surrounding AI deployment could impact business operations.