Palantir Earnings: Ink Turns Black as Firm Reports Strong Top-Line Growth

Palantir Stock at a Glance

• Fair Value Estimate: $9.00
• Morningstar Rating: 3 stars
• Morningstar Uncertainty Rating: Very High
• Morningstar Economic Moat Rating: Narrow

Palantir Earnings Update

We are maintaining our $9 fair value estimate for Palantir after the firm reported a strong quarter, including strong top-line growth, robust billings, and GAAP profitability. As we look ahead, we continue to have a positive outlook on Palantir’s set of government/commercial solutions and envision an improved business environment as macro pressures dissipate over time. We believe a renewed interest in artificial intelligence also bodes well for Palantir’s solutions, which have long leveraged artificial intelligence to deliver business outcomes for Palantir’s clients.

With shares up more than 20% after hours, we believe the market has calibrated its valuation to reflect Palantir’s strong fundamentals that we have previously highlighted, and we view the firm’s shares as fairly valued.

Palantir’s top line came in at $525 million, up 18% year over year, with governmental sales spearheading the growth at 20% year over year. Like other tech companies, investors have been keeping a keen eye on Palantir’s billings, a forward-looking metric. This metric expanded 25% year over year, showcasing the firm’s ability to drive spend on its solutions despite the murky macro conditions. Based on management’s commentary, we believe some of the uptick in billings may be driven by the recent surge in firms seeking to implement AI within their IT stacks.

On the profitability front, Palantir closed out the quarter with its inaugural GAAP operating profit (around $4 million for the quarter). The firm’s net income also remained positive for the second quarter in a row. We believe Palantir’s shift to profitability is driven primarily by a change in investor behavior, with increasing pressure on high-growth tech companies to moderate their operating expenditures and show a path to profitability in a tough macro environment.