Palantir earnings: What to expect from the software company riding the AI wave

Palantir Technologies Inc.’s stock has been among the biggest riders of the artificial-intelligence wave this year, and investors are about to find out how that craze has affected the company’s financials.

Given a huge run-up in Palantir
shares so far in 2023, with the name up more than 170% on the year, one analyst is adopting a wait-and-see stance ahead of Monday’s earnings, which come out after the closing bell.

Here are the numbers to watch. Analysts surveyed by FactSet expect the Denver-based data-integration and software company to report:

  • Second-quarter earnings of 5 cents a share on revenue of $533.4 million

  • A 4.1% rise in government sales to $301.9 million in the second quarter from the year-ago quarter

  • A 27.9% rise in commercial sales to $234 million in the second quarter

  • A third-quarter earnings forecast of 5 cents a share on revenue of $553.1 million

  • A forecast of 16.4% growth in government sales to $318.9 million in the third quarter from the year-ago quarter

  • A forecast of 14.5% growth in commercial sales to $233.6 million in the third quarter

Related: Palantir is well positioned for AI wave, but Mizuho analyst isn’t ready to turn bullish on the stock yet

Jefferies analyst Brent Thill thinks earnings “expectations are achievable, but offer limited upside as there are still several unknowns in the business.”

Thill listed the recovery timing of Palantir’s U.S. government business, the durability of its U.S. commercial growth and the pricing strategy for the company’s AI Platform as some of the uncertainties.

All of these “could cause near-term choppiness in the financials,” wrote Thill, who has a hold rating on the stock and a $17 price target.

Also read: Palantir is ‘the Messi of AI,’ says analyst who thinks its stock can jump 45%

“Palantir has been one of the top beneficiaries of the AI wave, with its newly launched AI platform enabling a multimodal AI by combining existing predictive and causal AI insights with [large-language model] and [generative] AI capabilities,” Thill said in his report, but he added he’d prefer to stick to the sidelines “until more signs of business execution are shown.”

Monness, Crespi, Hardt & Co. analyst Brian White said he expects Palantir’s commercial activity “to remain susceptible to the vicissitudes of the economy, while the timing of closing deals in the government market has proven unpredictable with lumpy revenue recognition.”

Still, he thinks the company can continue its recent string of outperformance in the U.S. market. He rates the stock at neutral.

While many stocks have gotten boosts this year thanks to enthusiasm around AI, Palantir shares have seen some of the biggest gains. Other significant winners include shares of Nvidia Corp.
which will report results Aug. 23, Meta Platforms Inc.
which said in late July that AI was already helping the company deliver useful ad products that aid its monetization objectives, and Inc.

Read: Will AI do to Nvidia what the dot-com boom did to Sun Microsystems? Analysts compare current hype to past ones.

Palantir shares fell 3% in Monday trading heading for the close and have shed 11% in August.

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