Palantir (NYSE:PLTR) Posts Better-Than-Expected Sales In Q2, Stock Soars

Radek Strnad /
2021/08/12 7:05 am EDT

Data-mining and analytics company Palantir (NYSE:PLTR) reported Q2 FY2021 results that beat analyst expectations, with revenue up 49.1% year on year to $375.6 million. Palantir made a GAAP loss of $138.5 million, down on its loss of $110.4 million, in the same quarter last year.

Is now the time to buy Palantir? Access our full analysis of the earnings results here, it's free.

Palantir (PLTR) Q2 FY2021 Highlights:

  • Revenue: $375.6 million vs analyst estimates of $361 million (4.02% beat)
  • EPS (non-GAAP): $0.04 vs analyst estimates of $0.03 (16% beat)
  • Revenue guidance for Q3 2021 is $385 million at the midpoint, above analyst estimates of $380.1 million
  • Free cash flow of $49.8 million, down 66.9% from previous quarter
  • Gross Margin (GAAP): 75.7%, down from 78.2% previous quarter

Having experience with building fraud-predicting algorithms at his previous company Paypal, Peter Thiel started Palantir after seeing US defence agencies struggle in the aftermath of the 2001 terrorist attacks. The company got its first external funding from the CIA and today Palantir (NYSE:PLTR) offers software as a service platform that helps government agencies and large enterprises use data to make better decisions.

Organizations generate a lot of data that is stored in silos, often in incompatible formats, making it costly and slow to extract actionable insights from it. This drives demand for data analysis platforms like Palantir.

Sales Growth

As you can see below, Palantir's revenue growth has been impressive over the last year, growing from quarterly revenue of $251.8 million, to $375.6 million.

Palantir Total Revenue

And unsurprisingly, this was another great quarter for Palantir with revenue up an absolutely stunning 49.1% year on year. On top of that, revenue increased $34.4 million quarter on quarter, a very strong improvement on the $19.1 million increase in Q1 2021, and a sign of acceleration of growth.

Analysts covering the company are expecting the revenues to grow 28.4% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

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What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Palantir's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 75.7% in Q2.

Palantir Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.75 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite the recent drop, this is still a good gross margin that allows companies like Palantir to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from Palantir's Q2 Results

With market capitalisation of $42 billion, more than $2.34 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by the exceptional revenue growth Palantir delivered this quarter. And we were also excited to see it that it outperformed Wall St’s revenue expectations. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 5.81% on the results and currently trades at $23.65 per share.

Should you invest in Palantir right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our full report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.