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.
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
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.
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.
Other companies with similar data management capabilities include Snowflake, Alteryx and cloud service providers such as Google, Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT).
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.
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
Sporting a market capitalization of $15.6 billion, more than $2.63 billion in cash and with positive free cash flow over the last twelve months, we're confident that Palantir has the resources it needs to pursue a high growth business strategy.
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, this quarter's results could have been better. The company is up 13.5% on the results and currently trades at $8.62 per share.
Is Now The Time?
When considering Palantir, investors should take into account its valuation and business qualities, as well as what happened in the latest quarter. We think Palantir is a solid business. We would expect growth rates to moderate from here, but its revenue growth has been strong, over the last two years. On top of that, its impressive gross margins are indicative of excellent business economics, and its strong free cash flow generation gives it re-investment options.
The market is certainly expecting long term growth from Palantir given its price to sales ratio based on the next twelve months is 7.4x. There are definitely things to like about Palantir and looking at the tech landscape right now, it seems that it doesn't trade at an unreasonable price point.
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