What happened
Shares of Palantir (PLTR 0.75%) are down 8.7% as of 10:40 a.m. EDT Tuesday despite a solid second-quarter report and raised forward guidance from the data analytics leader.
More specifically, Palantir's revenue climbed 13% year over year (YOY), to $533.3 million, above its own guidance for a range of $528 million to $532 million, but also technically slightly below analysts' consensus estimates for $533.9 million. On the bottom line, that translated to a generally accepted accounting principles (GAAP) net income of $0.01 per share (the company's third straight quarter of GAAP profitability) and adjusted (non-GAAP) earnings of $0.05 per share -- roughly in line with Wall Street's expectations.
So what
Delving deeper into Palantir's results, commercial segment revenue climbed 10% YOY to $232 million, led by 20% growth in the United States (to $103 million). Government revenue rose 15% to $302 million, including a 31% bump in international government revenue to $76 million. Palantir's customer count climbed 8% sequentially from last quarter and 38% YOY, including a 35% increase in U.S. commercial customers to 161.
In a letter to shareholders, Palantir co-founder and CEO Alex Karp said demand for the company's recently released artificial intelligence platform (AIP) "is unlike anything we have seen in the past twenty years." Karp wrote that Palantir AIP is already being used by over 100 organizations "including some of the largest enterprises in the world from the healthcare, finance, automotive, and energy sectors." He added that Palantir is in discussions with over 300 additional enterprises looking to deploy AIP in the near future.
"The scale of the opportunity that lies ahead has increased significantly in recent months," Karp concluded. "And we intend to capture it."
Now what
Looking ahead to the third quarter, Palantir expects another quarter of GAAP net income on revenue of $553 million to $557 million -- well above the $552 million most analysts were modeling. For the full year of 2023, Palantir also raised its outlook to call for revenue "in excess of $2.212 billion" or above the midpoint of previous guidance for a range of $2.185 billion to $2.235 billion, while reiterating its expectation for positive GAAP net income in each quarter.
So why the decline today? Even after the drop, Palantir remains among the most richly valued AI stocks on the market, trading at a forward price-to-sales (P/S) ratio of nearly 16. Given that Palantir shares have still more than doubled over the past three months and the fact that it "only" modestly exceeded its guidance in Q2, traders are likely using this decent-but-not-jaw-dropping performance as an excuse to take some profits off the table.
