Palantir Technologies Inc (PLTR) reported a robust performance for Q3 2023, achieving a revenue of $558 million, reflecting a 17% year-over-year growth. The company marked its fourth consecutive quarter of GAAP profitability, a first on a trailing twelve-month basis, with net income reported at $72 million, representing a 13% net profit margin. The U.S. commercial business experienced a significant acceleration, growing by 33% year-over-year and 13% sequentially, driven by heightened demand for AI-driven solutions. This quarter's results underscore Palantir's commitment to innovation, particularly with its Artificial Intelligence Platform (AIP), which has rapidly transformed customer engagements and expanded its market footprint. Management is optimistic about maintaining revenue momentum into Q4 and beyond, projecting revenue between $599 million and $603 million, supported by strong demand across both government and commercial sectors.
Key Performance Indicators
Revenue
558.16M
QoQ: 4.66% | YoY:16.80%
Gross Profit
450.24M
80.66% margin
QoQ: 5.59% | YoY:21.60%
Operating Income
39.98M
QoQ: 296.89% | YoY:-164.29%
Net Income
71.51M
QoQ: 154.22% | YoY:-157.72%
EPS
0.03
QoQ: 150.76% | YoY:-155.44%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $558 million (up 17% YoY, 5% QoQ)
**Net Income:** $72 million (net margin 13%)
**GAAP Profitability:** Fourth consecutive quarter with trailing 12-month GAAP profitability
**Adjusted Gross Margin:** 82%
**Cash Flow from Operations:** $133 million
Financial Highlights
Key Financial Metrics:
- Revenue: $558 million (up 17% YoY, 5% QoQ)
- Net Income: $72 million (net margin 13%)
- GAAP Profitability: Fourth consecutive quarter with trailing 12-month GAAP profitability
- Adjusted Gross Margin: 82%
- Cash Flow from Operations: $133 million
- Free Cash Flow: $141 million (25% margin) Performance Trends:
- U.S. Commercial Revenue Growth: 33% YoY (exceeding $116 million)
- International Commercial Revenue: Up 15% YoY to $134 million
- Customer Growth: Total customer count up 34% YoY to 453 customers
Management attributes this growth partly to AIP's ability to deliver faster implementations, evidenced by comments from Ryan Taylor who stated, 'We are pleased to report...our U.S. commercial business accelerated last quarter, growing 33% year-over-year.'
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
558.16M
16.80%
4.66%
Gross Profit
450.24M
21.60%
5.59%
Operating Income
39.98M
-164.29%
296.89%
Net Income
71.51M
-157.72%
154.22%
EPS
0.03
-155.44%
150.76%
Key Financial Ratios
currentRatio
5.53
grossProfitMargin
80.7%
operatingProfitMargin
7.16%
netProfitMargin
12.8%
returnOnAssets
1.71%
returnOnEquity
2.24%
debtEquityRatio
0.07
operatingCashFlowPerShare
$0.06
freeCashFlowPerShare
$0.06
priceToBookRatio
10.85
priceEarningsRatio
120.97
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management Insights:
- AIP's transformative potential: 'Our U.S. commercial business accelerated last quarter... and we expect AIP's impact to continue to intensify.' â Ryan Taylor
- Customer engagement improvements: 'We're seeing different stakeholders at the table... a quicker time to value for customers.' â Ryan Taylor
- Product innovation focus: 'We're investing meaningfully in boot camps as our go-to-market strategy for AIP.' â Ryan Taylor
- Strategic contracts: 'Just several weeks ago, it was announced that the Army awarded us a new contract worth up to $250 million.' â Ryan Taylor
These insights reflect Palantir's agility in response to market demands and its proactive approach in leveraging AI to enhance value for clients.
'Our U.S. commercial business accelerated last quarter... growing 33% year-over-year.'
â Ryan Taylor
'We almost tripled the number of AIP users last quarter.'
â Ryan Taylor
Forward Guidance
Management set a positive outlook for Q4 2023, projecting revenue between $599 million and $603 million, with an expectation of continued demand for innovative AI solutions across government and commercial sectors. They also raised their revenue guidance for the full year to between $2.216 billion and $2.22 billion. They emphasized a strategy of maintaining profitability while investing in strategic initiatives to support ongoing growth, particularly in AIP.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
PLTR Focus
80.66%
7.16%
2.24%
120.97%
PANW
72.40%
10.70%
8.75%
129.19%
ADBE
88.10%
34.70%
8.89%
45.76%
CRWD
75.20%
0.40%
1.31%
396.59%
SQ
33.80%
-0.18%
-0.16%
-233.60%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The investment outlook for Palantir Technologies appears favorable given its consistent growth trajectory and demonstrated commitment to innovation. The company is well-positioned to capitalize on burgeoning demands for AI-driven solutions, evidenced by strong performance metrics, and management's positive guidance. Investors should monitor upcoming earnings for additional insights into operational efficiency and customer growth rates, particularly how effectively Palantir can leverage its strengths against competitive pressures and potential pricing challenges.
Key Investment Factors
Growth Potential
Palantir's market expansion is heavily anchored in its AI offerings, which have shown to improve customer conversion rates significantly. The potential market for AIP is enormous, given its rapid adoption across diverse sectors including healthcare and construction.
Profitability Risk
Potential risks include government budgetary uncertainties affecting contract reliance, as well as competition from other tech providers in the AI space. Additionally, ongoing geopolitical tensions may influence government demand for technology solutions.
Financial Position
Palantir demonstrated a solid balance sheet with $3.3 billion in cash, cash equivalents, and short-term investments. The company maintained a healthy cash flow, evidenced by a trailing 12-month adjusted free cash flow exceeding $500 million.
SWOT Analysis
Strengths
Strong year-over-year revenue growth driven by AI innovations and new customer acquisitions.
Fourth consecutive quarter of profitable operations and positive cash flow.
Robust balance sheet with significant cash reserves supporting strategic investments.
Weaknesses
Heavily reliant on government contracts, which may be subject to political and budgetary risks.
Challenges in expanding presence in the international commercial sector amid varying conditions.
Opportunities
Ongoing demand for AI solutions presents a vast market potential for AIP and other offerings.
Expanding partnerships in the defense sector, with new government contracts expected to enhance revenue streams.
Threats
Intense competition from technology providers in the AI space.
Geopolitical risks affecting government contracts and overall demand.