Data-mining and analytics company Palantir (NYSE:PLTR) beat analyst expectations in Q1 FY2023 quarter, with revenue up 17.7% year on year to $525.2 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $530 million, 1.16% below analyst estimates. Palantir made a GAAP profit of $19.2 million, improving on its loss of $101.4 million, in the same quarter last year.
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Palantir (PLTR) Q1 FY2023 Highlights:
- Revenue: $525.2 million vs analyst estimates of $505.9 million (3.8% beat)
- EPS (non-GAAP): $0.05 vs analyst estimates of $0.04 (25% beat)
- Revenue guidance for Q2 2023 is $530 million at the midpoint, below analyst estimates of $536.2 million
- The company reconfirmed revenue guidance for the full year, at $2.21 billion at the midpoint
- Free cash flow of $188.9 million, up 156% from previous quarter
- Gross Margin (GAAP): 79.5%, 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 strong over the last two years, growing from quarterly revenue of $341.2 million in Q1 FY2021, to $525.2 million.
This quarter, Palantir's quarterly revenue was once again up 17.7% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $16.6 million in Q1, compared to $30.7 million in Q4 2022. 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 12% year on year to $530 million, slowing down from the 25.9% 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 15.9% over the next twelve months.
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 Q1.
That means that for every $1 in revenue the company had $0.80 left to spend on developing new products, marketing & sales and the general administrative overhead. 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. It is good to see that the gross margin is staying stable which indicates that Palantir is doing a good job controlling costs and is not under pressure from competition to lower prices.
Key Takeaways from Palantir's Q1 Results
With a market capitalization of $15.7 billion, more than $2.9 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 outperform Wall St’s revenue expectations this quarter and reconfirm full year guidance on the back of solid free cash flow. On the other hand, revenue guidance for the next quarter missed analysts' expectations, but the company expects to catch-up by the end of the year. Overall, this quarter's results were solid. The company is up 18.7% on the results and currently trades at $9.21 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.
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 70% 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.