Data-mining and analytics company Palantir (NYSE:PLTR) reported results in line with analyst expectations in Q4 FY2022 quarter, with revenue up 17.5% year on year to $508.6 million. However, guidance for the next quarter was less impressive, coming in at $505 million at the midpoint, being 2.94% below analyst estimates. Palantir made a GAAP profit of $33.5 million, improving on its loss of $156.2 million, in the same quarter last year.
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Palantir (PLTR) Q4 FY2022 Highlights:
- Revenue: $508.6 million vs analyst estimates of $505 million (small beat)
- EPS (non-GAAP): $0.04 vs analyst estimates of $0.03 (49.5% beat)
- Revenue guidance for Q1 2023 is $505 million at the midpoint, below analyst estimates of $520.3 million
- Management's revenue guidance for upcoming financial year 2023 is $2.21 billion at the midpoint, missing analyst estimates by 3.6% and predicting 15.7% growth (vs 24% in FY2022)
- Gross Margin (GAAP): 79.5%, in line with same quarter last year
“With this result, Palantir is profitable. This is a significant moment for us and our supporters,” said Alex Karp, co-founder and chief executive officer of Palantir Technologies.
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 two years, growing from quarterly revenue of $322.1 million in Q4 FY2020, to $508.6 million.
This quarter, Palantir's quarterly revenue was once again up 17.5% year on year. We can see that the company increased revenue by $30.7 million quarter on quarter. That's a solid improvement on the $4.87 million increase in Q3 2022, so shareholders should appreciate the acceleration of growth.
Guidance for the next quarter indicates Palantir is expecting revenue to grow 13.1% year on year to $505 million, slowing down from the 30.8% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $2.21 billion at the midpoint, growing 15.7% compared to 23.6% increase in FY2022.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
Profitability
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 79.5% in Q4.
That means that for every $1 in revenue the company had $0.79 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is 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 Q4 Results
With a market capitalization of $15.6 billion, more than $2.63 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 improve their gross margin this quarter, and the market is cheering the first profitable quarter on a GAAP basis. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that Palantir's revenue guidance for the full year missed analysts' expectations and the revenue guidance for the next quarter missed analysts' expectations. Overall, it seems to us that this was a complicated quarter for Palantir. The company is up 13.1% on the results and currently trades at $8.59 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.