Data-mining and analytics company Palantir (NYSE:PLTR) reported results in line with analysts' expectations in Q3 FY2023, with revenue up 16.8% year on year to $558.2 million. The company also expects next quarter's revenue to be around $601 million, in line with analysts' estimates. Turning to EPS, Palantir made a GAAP profit of $0.03 per share, improving from its loss of $0.06 per share in the same quarter last year.
Is now the time to buy Palantir? Find out in our full research report.
Palantir (PLTR) Q3 FY2023 Highlights:
- Revenue: $558.2 million vs analyst estimates of $555.9 million (small beat)
- EPS (non-GAAP): $0.07 vs analyst estimates of $0.06 (25.1% beat)
- Revenue Guidance for Q4 2023 is $601 million at the midpoint, roughly in line with what analysts were expecting
- Free Cash Flow of $131.9 million, up 52.9% from the previous quarter
- Gross Margin (GAAP): 80.7%, up from 77.5% in the 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.
As you can see below, Palantir's revenue growth has been strong over the last two years, growing from $392.1 million in Q3 FY2021 to $558.2 million this quarter.
This quarter, Palantir's quarterly revenue was once again up 16.8% year on year. We can see that Palantir's revenue increased by $24.8 million quarter on quarter, which is a solid improvement from the $8.13 million increase in Q2 2023. At least some shareholders will be pleased with the acceleration of growth.
Next quarter's guidance suggests that Palantir is expecting revenue to grow 18.2% year on year to $601 million, in line with the 17.5% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 18% over the next 12 months before the earnings results announcement.
The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. See it here.
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's left after paying for servers, licenses, technical support, and other necessary running expenses, was 80.7% in Q3.
That means that for every $1 in revenue the company had $0.81 left to spend on developing new products, sales and marketing, and general administrative overhead. Trending up over the last year, Palantir's excellent gross margin allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity.
Key Takeaways from Palantir's Q3 Results
With a market capitalization of $32.1 billion, a $3.28 billion cash balance, and positive free cash flow over the last 12 months, we're confident that Palantir has the resources needed to pursue a high-growth business strategy.
Palantir beat both revenue and EPS estimates, and provided in-line guidance. We enjoyed seeing the strong free cash flow. Zooming out, we think this was a decent quarter, showing that the company is staying on target. The stock is up 12.8% after reporting and currently trades at $16.84 per share.
So should you invest in Palantir right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned in this report.