Palantir released a third-quarter earnings report on Monday so huge that its press release even boasted that the numbers “crushed consensus expectations.”
Still, retail investors were lukewarm on the company Tuesday, with the stock trading slightly lower. Indeed, Palantir’s corporate sales, its main growth area, have shown signs of slowing.
First of all, good news for the company’s investors. Revenue grew 96% year over year to $2.31 billion, the first time it has surpassed the $2 billion mark. Palantir’s revenue, which also rose 20% from the previous quarter, beat analysts’ expectations of $2.18 billion. Palantir also reported adjusted earnings per share of $0.44, compared to $0.41 expected by analysts. The company even raised its revenue forecast for the full year. Normally, that alone would send stocks soaring.
The clincher was that Palantir’s U.S. commercial revenues exceeded U.S. government revenues for the first time. The company reported $984 million in commercial contracts (up 148% from the year-ago quarter), compared to $953 million in U.S. government revenue.
The reason for all this corporate love? They sign up for the company’s AI software that can run frontier models and train custom open-weight models securely, without sharing any of their data and business processes with external AI labs. Additionally, Palantir has always offered what is now called “forward-deployed” software engineering, which helps customers customize its products.
However, Palantir also revealed a far from rosy signal: Even though companies are moving faster than ever, they are often signing up for short-term trials.
“What Ryan and I are seeing on the front lines and on the business side is much faster interaction, much faster deployment, shorter contract duration but then an ability to significantly expand that contract,” CEO Alex Karp (pictured above) told Wall Street analysts on the quarterly conference call.
Palantir is currently experiencing one of the unique AI phenomena in the enterprise. Companies are willing to quickly try AI software without their usual bureaucracy, but they are also more willing to cancel contracts.
Karp used one inappropriate metaphor after another to describe how he didn’t care about keeping his business.
“We went from being the most attractive person in the physics department to being the captain of the football team, sort of,” he said, describing the influx of potential corporate clients. “Conversely, you know, once you go to Palantir, you don’t go back, and that’s the way it is, and you see it in our numbers.”
The numbers don’t yet confirm Palantir’s long-term success. While the company closed a total contract value of $1.46 billion from U.S. companies during the quarter, that was actually down from its record $2.13 billion in enterprise TCV in the previous quarter. This suggests a deceleration in sales, at least in the last quarter.
Upcoming results will show whether Palantir has cemented its role as America’s burgeoning enterprise AI provider. Historically, many companies make their biggest technology purchases during the last quarter of the year. Karp and his team are certainly confident. They increased their forecast that U.S. trade revenues would “exceed $3.559 billion, representing a growth rate of at least 143 percent.”
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