Palantir Technologies (PLTR, Financial) saw a 10% surge in shares following an impressive Q2 report. Initially a CIA-funded startup over 20 years ago, the AI software developer posted strong top and bottom-line results, leading to an increased FY24 revenue forecast. Unlike last quarter, where adjusted EPS met expectations, PLTR beat analyst predictions in Q2. This comes after a 20% correction, making the positive results a relief for investors. The results also highlighted the ongoing robust demand for AI, even amid a broader market pullback.
In Q2, PLTR capitalized on its expertise in transitioning organizations and government agencies from AI prototyping to production. Management noted that the market is currently bottlenecked in this transition phase, likening AI prototyping to creating a PowerPoint presentation and production to generating material benefits.
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PLTR's competitive edge was evident in Q2:
- Top-line growth accelerated with a 27.2% year-over-year increase to $678.13 million, up from 20.8% in Q1 and 19.6% in Q4 2023.
- Adjusted operating margins expanded, leading to an 80% year-over-year increase in adjusted EPS to $0.09.
- On a GAAP basis, PLTR achieved its seventh consecutive quarter of profitability.
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Government revenue continued to ramp up:
- Revenue climbed 23% year-over-year and 11% sequentially to $371 million.
- PLTR secured several significant U.S. government awards, marking its best U.S. government bookings quarter since 2022.
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Commercial revenue grew robustly:
- Revenue increased by 33% year-over-year and 3% sequentially to $307 million.
- Excluding the impact of strategic commercial contracts, the segment saw 40% year-over-year revenue growth, consistent with last quarter.
- Customer count rose by 41% year-over-year and 7% sequentially to 593.
- Trailing 12-month revenue from PLTR's top-20 customers grew by 9% year-over-year to $57 million per customer.
- International commercial revenue growth remained modest at 15% year-over-year to $148 million, with targeted growth in Asia and the Middle East to offset European headwinds.
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FY24 revenue outlook raised:
- PLTR increased its FY24 revenue projection to $2.742-2.750 billion from $2.677-2.689 billion.
- The company maintained its expectation of positive GAAP operating and net income in each quarter of FY24.
PLTR's Q2 report provided much-needed relief after a recent correction. We previously noted that the pullback following Q1 results in May presented a compelling entry point for long-term investors. With a strong Q2 performance, PLTR continues to stand out in the AI sector, particularly with its U.S. government ties and expanding portfolio of private companies.
