Palantir beat expectations and booked its first quarter with more than $2 billion in revenue, yet its shares fell on Tuesday. Slower growth in U.S. commercial contract value gave some analysts pause, while one market expert pointed to the high bar facing AI companies.
Palantir shares were down 3% on Tuesday despite better-than-expected results. One market expert attributed the drop to the high bar that artificial-intelligence companies face in the current trading climate.
According to Ryan Lee of Direxion, Palantir "came into earnings priced to perfection, hence the pullback off the beat" in a note to clients.
Revenue tops $2 billion as U.S. commercial growth slows
Palantir recorded its first quarter with over $2 billion in revenue, nearly double the year-earlier total. Its U.S. commercial sales also topped U.S. government sales for the first time, which indicates Palantir's AI software is catching on with businesses.
However, William Blair analyst Louie DiPalma wrote that investors may have been disappointed by the slower growth in U.S. commercial total contract value. Palantir closed $1.46 billion of U.S. commercial deals, up 11% from a year prior. That compares with 153% growth in the second quarter, and DiPalma added it is the lowest growth since 2023.
Management pushes sovereign AI
On the earnings call, chief revenue officer Ryan Taylor said he was invigorated by customer ambition and demand for sovereign AI. CEO Alex Karp said that U.S. commercial, viewed as a nice-to-have part of the business as late as three years ago, is now the dominant part of it.
Free cash flow reaches $1.216 billion
Lee also noted Palantir's free cash flow. Adjusted free cash flow came in at $1.216 billion, a 53% margin on total revenue, against $540 million a year ago.
Heading into earnings, Palantir shares were off 16% from their October peak of $212.94, though they had gained 45% on the year.
Source: MarketWatch
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