Palantir's (NYSE:PLTR) Q1: Beats On Revenue But Stock Drops

Full Report / May 06, 2024

Data-mining and analytics company Palantir (NYSE:PLTR) reported Q1 CY2024 results topping analysts' expectations, with revenue up 20.8% year on year to $634.3 million. Guidance for next quarter's revenue was also better than expected at $651 million at the midpoint, 1.2% above analysts' estimates. It made a non-GAAP profit of $0.08 per share, improving from its profit of $0.05 per share in the same quarter last year.

Palantir (PLTR) Q1 CY2024 Highlights:

  • Revenue: $634.3 million vs analyst estimates of $617.6 million (2.7% beat)
  • Billings: $619.5 million vs analyst estimates of $637.0 million (2.7% miss)
  • EPS (non-GAAP): $0.08 vs analyst expectations of $0.08 (in line)
  • Revenue Guidance for Q2 CY2024 is $651 million at the midpoint, above analyst estimates of $643.4 million
  • The company lifted its revenue guidance for the full year from $2.66 billion to $2.68 billion at the midpoint, a 0.9% increase
  • Gross Margin (GAAP): 81.7%, up from 79.5% in the same quarter last year
  • Free Cash Flow of $126.9 million, down 58.4% from the previous quarter
  • Market Capitalization: $51.96 billion

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.

Palantir’s technology provides customers with capabilities to gather and ingest data from almost any source in almost any format and store it in the same type of interconnected architecture that Google uses. On top of the data platform then sits a range of data analysis and visualization tools, each with specific use cases from crime investigations, counterterrorism operation planning over to supply chain management and financial compliance.

Data Analytics

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 siloed data.

Other companies with similar data management capabilities include Snowflake, Alteryx and cloud service providers such as Google, Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT).

Sales Growth

As you can see below, Palantir's revenue growth has been strong over the last three years, growing from $341.2 million in Q1 2021 to $634.3 million this quarter.

Palantir Total Revenue

This quarter, Palantir's quarterly revenue was once again up a very solid 20.8% year on year. However, its growth did slow down compared to last quarter as the company's revenue increased by just $25.99 million in Q1 compared to $50.19 million in Q4 CY2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter's guidance suggests that Palantir is expecting revenue to grow 22.1% year on year to $651 million, improving on the 12.7% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 20.5% over the next 12 months before the earnings results announcement.


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 81.7% in Q1.

Palantir Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.82 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.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Palantir's free cash flow came in at $126.9 million in Q1, down 32.8% year on year.

Palantir Free Cash Flow

Palantir has generated $668.5 million in free cash flow over the last 12 months, an eye-popping 28.6% of revenue. This robust FCF margin stems from its asset-lite business model, scale advantages, and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.

Key Takeaways from Palantir's Q1 Results

It was good to see Palantir beat analysts' revenue expectations this quarter. We were also glad next quarter's revenue guidance came in higher than Wall Street's estimates. On the other hand, its billings unfortunately missed analysts' expectations. Overall, this was a mixed quarter for Palantir. The company is down 6.1% on the results and currently trades at $23.68 per share.

Is Now The Time?

When considering an investment in Palantir, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

There are several reasons why we think Palantir is a great business. First off, its revenue growth has been solid over the last three years. Additionally, its bountiful generation of free cash flow empowers it to invest in growth initiatives, and its impressive gross margins indicate excellent business economics.

There's no doubt the market is optimistic about Palantir's growth prospects, as its 21.5x price-to-sales ratio based on the next 12 months would suggest. Looking at the tech landscape today, Palantir's qualities as one of the best businesses really stand out and there's no doubt it's a bit of a market darling. We don't mind paying a premium for a premium business and would argue that it's often wise to hold on to quality businesses long term, even when expectations are high, but we do want to mention that there seems to be a lot optimism priced in at the moment.

Wall Street analysts covering the company had a one-year price target of $20.54 right before these results (compared to the current share price of $23.68).

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