What Happened?
Shares of data-mining and analytics company Palantir (NYSE:PLTR) jumped 26.9% in the morning session after the company reported impressive fourth-quarter results, which blew past analysts' billings, revenue, and EPS estimates, amid encouraging AI demand. Both its commercial and government businesses posted strong double-digit growth. The government side remains the bigger earner, but the commercial division is gaining ground, especially in the U.S. There, commercial sales jumped 64% from a year ago and 20% from the prior quarter. Looking ahead, the outlook provided was also encouraging, with the company's 2025 revenue guidance exceeding expectations. Zooming out, we think this was an outstanding quarter.
After the solid results, several Wall Street firms upgraded their ratings. Morgan Stanley upgraded PLTR from Sell to Hold, adding, "Given the strength of the outlook, we acknowledge that we were wrong about our core fundamental catalyst of slowing growth below the 30% level due to the tougher compares in 2025.".
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What The Market Is Telling Us
Palantir’s shares are very volatile and have had 27 moves greater than 5% over the last year. But moves this big are rare even for Palantir and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock gained 28.5% on the news that the company reported strong fourth-quarter results with expectations for revenue growth to accelerate in the next fiscal year, highlighting growing demand for its new artificial intelligence platform (AIP), which was launched in 2023. It is also encouraging to learn that the company has improved the time it takes to deploy AIP and integrate with client's data from "weeks and months to as little as a few hours." The icing on the cake is adjusted operating income well above expectations, showing that the company is not sacrificing profits for the higher topline growth.
Also, its revenue, billings, and free cash flow exceeded Wall Street's expectations in the quarter, and its gross margin improved. Notably, the US commercial business significantly contributed to the solid performance during the quarter, as revenue in the segment grew 70% year on year and 12% sequentially.
Looking ahead, the company expects the US commercial business to grow at least 40% in 2024. A minor negative was that revenue guidance for the next quarter missed analysts' expectations. Overall, this was a very solid quarter for Palantir.
Palantir is up 35% since the beginning of the year, and at $101.49 per share, has set a new 52-week high. Investors who bought $1,000 worth of Palantir’s shares at the IPO in September 2020 would now be looking at an investment worth $10,683.
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