Palantir Sees Remarkable Surge in Profits Driven by AI Demand

Palantir Stock

Palantir Technologies Inc. (NYSE:PLTR) experienced its most significant surge in almost half a year, following the company’s announcement of its fourth consecutive quarter of profitability. This achievement marked the highest earnings in the company’s two-decade history, primarily fueled by the strong demand for their cutting-edge artificial intelligence solutions.

The Denver-based data analysis firm disclosed its expectations for the year, with adjusted operating income projected to fall within the range of $607 million to $611 million. These numbers surpassed the average estimates of analysts, which had forecasted $577 million. Palantir also anticipates 2023 revenue of approximately $2.22 billion, narrowly exceeding analyst expectations. This positive news caused the company’s stock to surge by as much as 23%, reaching $18.30, marking its most substantial intraday gain since May.

Palantir, renowned for its collaboration with intelligence agencies and its billionaire co-founder Peter Thiel, revealed a net income of $72 million for the quarter ending on September 30. Additionally, the company reported a 17% increase in revenue, bringing it to $558 million.

In a letter to shareholders, Palantir’s Chief Executive Officer, Alex Karp, proudly stated, “We earned the most substantial profit in our company’s twenty-year history.” He also mentioned that the company is now eligible for inclusion in the S&P 500, a milestone they had been diligently working towards.

Despite prior criticisms on Wall Street for relying heavily on engineers to customize software for individual clients, Palantir has significantly automated its processes in recent years. According to Karp, revenue per employee has nearly doubled over the past four years.

The strong performance of Palantir’s stock began when they announced a high demand for their AI offerings earlier this year, which coincided with the introduction of a new product known as the “Artificial Intelligence Platform.” Karp even expressed reservations about selling the powerful tools to certain customers due to their exceptional capabilities.

Palantir has made remarkable progress in expediting the setup process for its customers. Chief Legal Officer and Chief Revenue Officer, Ryan Taylor, revealed that instead of traditional trial runs for users to experiment with their technology, the company is now organizing “boot camps” to efficiently train and convert potential customers into paying subscribers. What used to take as long as three months can now be accomplished in just one to five days.

Karp stated that Palantir plans to train 70 organizations in bootcamps during November alone, surpassing the total number of pilots completed by the company in the previous year. The effectiveness of this bootcamp approach has led Karp to believe that “Palantir can achieve a revenue run rate of $1 billion by 2025.”

The number of US-based commercial customers at the company grew by an impressive 37% in the third quarter, reaching a total of 181. Meanwhile, commercial revenue saw a substantial 23% increase, totaling $251 million. This commercial growth outpaced the revenue increase from government customers, which rose by 12%, reaching $308 million, although it fell slightly short of analyst expectations of $319 million.

In an interview, Palantir’s Chief Financial Officer, David Glazer, attributed the slower government spending during the third quarter to “near-term uncertainty” associated with budgeting.

It’s worth noting that Palantir’s software has been in use by Ukrainian defense forces since Russia’s invasion, and the company has been active in Israel for over a decade.

Karp emphatically referred to the October attack by Hamas on Israel as “terrorism” and affirmed Palantir’s full support for Israel, as the company is actively assisting in the Israeli effort. He stated, “We are on the front lines fighting what amounts to evil.”

To conclude, Palantir wrapped up the quarter with $3.3 billion in cash, cash equivalents, and short-term US Treasury securities.

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