Palantir (NYSE:PLTR) Reports Q1 In Line With Expectations But Stock Drops

Jabin Bastian /
2022/05/09 7:10 am EDT

Data-mining and analytics company Palantir (NYSE:PLTR) reported results in line with analyst expectations in Q1 FY2022 quarter, with revenue up 30.8% year on year to $446.3 million. However, guidance for the next quarter was less impressive, coming in at $470 million at the midpoint, being 2.84% below analyst estimates. Palantir made a GAAP loss of $101.3 million, improving on its loss of $123.4 million, in the same quarter last year.

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Palantir (PLTR) Q1 FY2022 Highlights:

  • Revenue: $446.3 million vs analyst estimates of $443.5 million (small beat)
  • EPS (non-GAAP): $0.02 vs analyst expectations of $0.04 (45.3% miss)
  • Revenue guidance for Q2 2022 is $470 million at the midpoint, below analyst estimates of $483.7 million
  • Free cash flow of $20.2 million, down 76.8% from previous quarter
  • Gross Margin (GAAP): 78.8%, in line with same quarter last year

Started by Peter Thiel after seeing US defence agencies struggle in the aftermath of the 2001 terrorist attacks, 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 slow and costly to extract actionable insights, which in turn drives demand for modern cloud-based data analysis platforms that can efficiently analyze the silo-ed data.

Sales Growth

As you can see below, Palantir's revenue growth has been very strong over the last year, growing from quarterly revenue of $341.2 million, to $446.3 million.

Palantir Total Revenue

And unsurprisingly, this was another great quarter for Palantir with revenue up 30.8% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $13.4 million in Q1, compared to $40.7 million in Q4 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Palantir is expecting revenue to grow 25.1% year on year to $470 million, slowing down from the 49.1% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 29.1% over the next twelve months.

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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, licenses, technical support and other necessary running expenses was at 78.8% in Q1.

Palantir Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.78 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 Q1 Results

With a market capitalization of $19.3 billion, more than $2.52 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.

It was good to see Palantir deliver strong revenue growth this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and gross margin deteriorated a little. Overall, this quarter's results were not the best we've seen from Palantir. The company is down 6.43% on the results and currently trades at $8.87 per share.

Palantir may have had a tough quarter, but does that actually create an opportunity to invest 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 actionable report which you can read here, it's free.

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