Palantir’s Q4 Earnings Highlight Strong Growth and AI Strategy Shift
Chicago, IL – February 6, 2025 – Zacks Investment Ideas is focusing on Palantir PLTR, Meta Platforms Inc. META, Microsoft Corp. MSFT, and Alphabet Inc. GOOGL.
Palantir Shines with Positive Financial Results for Q4
Palantir, a software platform focused on artificial intelligence (AI) and data analytics, delivered impressive fourth-quarter earnings for 2024. Their success can be seen in three main areas: exceptional business performance, positive 2025 outlook, and a shift in revenue focus from government to commercial sectors.
Founded to assist with counterterrorism operations, Palantir Technologies has worked closely with the intelligence community in the U.S., U.K., and beyond, making the U.S. defense sector its primary customer.
Exceptional Fourth-Quarter Performance
Palantir Technologies announced earnings of $0.14 per share, exceeding the Zacks Consensus Estimate of $0.11 and marking improvement from last year’s earnings of $0.08 per share, adjusted for non-recurring expenses.
Their quarterly revenue reached $827.52 million, also beating the Zacks Consensus Estimate by 6.44%. This is a significant increase from last year’s revenue of $608.35 million. Notably, U.S. commercial revenue climbed 64% year over year to $214 million, while government revenue increased by 45% to $343 million.
The company’s total customer base grew by 43%, with a remarkable 73% jump in U.S. commercial customers. Additionally, the value of total contracts (TCV) increased by 134%, and remaining deal value rose by 99% to $1.8 billion.
Positive Guidance for the Future
Looking ahead, Palantir forecasts first-quarter 2025 revenues between $858 million and $862 million, with the mid-point of $860 million well above the current Zacks Consensus Estimate of $798 million. Expectations for first-quarter EPS are set at $0.11, a 37.5% increase from last year.
For the year, Palantir anticipates total revenues between $3.741 billion and $3.757 billion. The mid-point of $3.75 billion is significantly higher than the $3.54 billion estimate. They also project U.S. commercial revenues to increase by 54% year over year, exceeding $1.08 billion. The Zacks Consensus Estimate for 2025 EPS stands at $0.48, indicating a 17.1% rise year over year.
A Transformational Shift in Revenue Streams
Recently, Palantir Technologies has accelerated its commercial business strategy in addition to its longstanding government contracts, largely due to its proactive moves in the AI sector. In 2023, they introduced the Artificial Intelligence Platform (AIP) to streamline data analysis and support business objectives.
AIP integrates diverse access to open-source and proprietary large language models, facilitating efficient processing of both structured and unstructured data. This evolution allows the company to reduce its reliance on government entities for revenue.
Following the Q4 earnings announcement, Palantir’s stock soared by 24% on February 4, finishing at $103.83 after hitting an all-time high of $106.91.
Potential for Further Growth
Palantir’s analytics tools are utilized by governmental bodies for tasks such as intelligence and military operations. Their integration with generative AI is now extending into healthcare, energy, and manufacturing industries.
In the fourth quarter, Palantir secured 129 contracts worth at least $1 million, including 58 contracts worth at least $5 million and 32 that exceeded $10 million. The company’s remaining performance obligation (RPO) rose by 40% year over year, totaling $1.73 billion.
The generative AI market shows remarkable potential, with firms like McKinsey & Company predicting its future value could reach $2.6 to $4.4 trillion. Bloomberg Intelligence estimates that spending in this area could surge from $67 billion in 2023 to $1.3 trillion by 2032.
Post earnings release, leading AI companies such as Meta Platforms Inc., Microsoft Corp., and Alphabet Inc. have reaffirmed their commitment to significant investments in generative AI initiatives.
Investment Perspective
Over the past year, Palantir’s stock price has increased by more than 500%. Despite trading at a high valuation, it continues to show promising long-term growth prospects. The long-term earnings per share (EPS) growth projection of 36.1% far outpaces the S&P 500’s estimated growth of 12.4%. Each significant price dip (3-5%) in the stock may present an enticing investment opportunity.
Currently, Palantir Technologies holds a Zacks Rank of #2 (Buy). The encouraging Q4 earnings and favorable rank position suggest that its stock might continue to rise in the near future.
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