Palantir (NYSE:PLTR) Q3 Sales Beat Estimates, Stock Jumps 13.4%

Data mining and analytics company Palantir (NYSE:PLTR) reported revenue in the third quarter of fiscal 2024 that exceeded Wall Street expectations. Revenue rose 30% year over year to $725.5 million. Additionally, revenue guidance for the next quarter ($769 million at the midpoint) was surprisingly good, coming in 3.4% ahead of analysts' expectations. Non-GAAP earnings of $0.10 per share were also 10.1% above analyst consensus estimates.

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• Revenue: $725.5 million vs. analyst estimates of $703.7 million (beat 3.1%)

• Adjusted EPS: $0.10 vs. analyst estimates of $0.09 (beat by $0.01)

• EBITDA: $283.6 million vs. analyst estimates of $244.9 million (beat 15.8%)

• Sales forecast for Q4 CY2024 is at the midpoint of $769 million, above analyst estimates of $744 million

• Gross margin (GAAP): 79.8%, which corresponds to the same quarter last year

• Operating margin: 15.6%, an increase from 7.2% in the same quarter last year

• EBITDA margin: 39.1%, an increase from 30.8% in the same quarter last year

• Free cash flow margin: 59.9%, an increase from 21.9% in the previous quarter

• Billings: $676.9 million at the end of the quarter, up 33.8% year over year

• Market capitalization: $93.88 billion

“We completely wiped out this quarter due to the unrelenting demand for AI that shows no signs of slowing down. This is a US-driven AI revolution that is in full swing. The world will be divided between AI haves and have-nots. At Palantir, we want to empower winners,” said Alexander C. Karp, co-founder and chief executive officer of Palantir Technologies Inc.

Palantir (NYSE:PLTR) was founded by Peter Thiel after he saw U.S. defense agencies struggle following the 2001 terrorist attacks. The company offers software as a service platform that helps government agencies and large companies use data to make better decisions.

Organizations generate a lot of data that is stored in silos, often in incompatible formats, making the generation of actionable insights slow and costly, which in turn drives demand for modern cloud-based data analytics platforms that can efficiently analyze the siled data.

A company's long-term performance is an indicator of overall business quality. While every company can experience short-term success, high-performing companies enjoy sustained growth over several years. Over the past three years, Palantir grew its revenue at a compound annual growth rate of 22.7%. This is a useful starting point for our analysis.

This quarter, Palantir reported robust 30% year-over-year revenue growth, beating Wall Street estimates by 3.1% with revenue of $725.5 million. Management currently expects a 26.4% year-over-year increase for the next quarter.

The story continues

Looking further ahead, sell-side analysts expect revenue to grow 19.9% ​​over the next 12 months, a slight slowdown from the last three years. This forecast is still commendable and shows that the market is counting on the success of its products and services.

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In addition to revenue, billings are a non-GAAP measure that shed additional light on Palantir's business quality. Statements are often referred to as “cash receipts” because they show how much money the company collected from customers during a specific period. This differs from sales revenue, which must be recognized in parts over the contract term.

Last year, Palantir's billings growth was impressive: the company grew an average of 22.9% year-over-year, reaching $676.9 million in the most recent quarter. This performance was consistent with revenue growth and indicated robust customer demand and a strong sales pipeline. The high cash receipts from customers also increase liquidity and provide a solid basis for future investments and growth.

The customer acquisition cost (CAC) payback period measures the months it takes a company to recoup the money spent on acquiring a new customer. This metric can be used to assess how quickly a company can break even on its sales and marketing investments.

Palantir is extremely efficient at acquiring new customers and its CAC payback period was 18.2 months this quarter. The company's efficiency shows that it has a highly differentiated product offering and a strong brand reputation, giving it the freedom to invest resources in new growth initiatives while maintaining option opportunities.

We were impressed by how significantly Palantir exceeded analysts' revenue and EBITDA expectations this quarter. We were also pleased that the company raised its full-year revenue and adjusted operating income guidance. Overall, this quarter had some important positives. Shares rose 13.7% to $47.12 immediately following the results.

In fact, Palantir had rock-solid quarterly earnings, but is this stock a good investment? We believe the latest quarter is just one piece of the longer-term business quality puzzle. Quality, combined with valuation, can help determine whether the stock is a buy. We cover this in our actionable full research report, which you can read for free here.