Palantir Technologies (NYSE: PLTR) trimmed its annual revenue projection after reporting an unexpected loss per share compared with consensus estimates for the second quarter. Palantir shares fell over 14% in response to earnings.
How Did Palantir Do in Q2?
The data analytics software company did manage to beat revenue projections but still saw its stock drop 15% before the trading ended on Monday. According to Refinitiv, Palantir’s earnings per share loss was 1 cent compared to the expected 3 cents, and revenue came in at $473 million topping the consensus estimate of $471.3 million.
For the quarter, Palantir’s revenue grew by 26% year over year, and its commercial revenue jumped by 46%, mostly due to a 250% rise in the number of business clients compared to the previous year.
Even though Palantir’s commercial growth is pervasive, CFO David Glazer blames the quarterly loss on a decline in investments and marketable securities. Moreover, the company had to modify its revenue prediction because the timing of some significant government contracts remained uncertain.
“What makes it so unexpected is the size of these contracts, along with government procurement,” Glazer said.
For the third quarter and the entire year, Palantir anticipates revenue of between $474 million and $475 million, and $1.9 billion and $1.902 billion, respectively.
Considering a significant push with EU governments post-Russia-Ukraine crisis, RBC Capital Markets analyst Rishi Jaluria said he was startled by the downturn in Palantir’s non-U.S. government business.
The company’s international operations, which account for about 40% of its sales, were negatively impacted by currency conversion issues, Glazer explained.
Palantir’s CEO Alexander Karp remains confident regarding the future, despite the loss.
“The strength and momentum we are seeing with our customers in the United States is a reflection of the refinement and maturation of our software platforms, which we believe will continue leading to increasingly broad adoption across sectors,” Karp said.
What Are Analysts Saying
Deutsche Bank analysts cut their recommendation on Palantir stock to Sell after witnessing soft results and guidance. Elsewhere, Palantir shares have been reaffirmed at a Buy recommendation by Bank of America analyst Mariana Pérez Mora, who thinks the company would profit from the government’s need for data supervision.
According to a study conducted by the Government Accountability Office (GAO), data from facial recognition technology (FRT) has commenced being used by 18 out of 24 federal agencies.
“However, internal studies have shown that many agencies have relied on non-federal FRT systems and were not effectively tracking usage, an unsafe and potentially compromising practice. For context, out of 14 federal agencies using FRT to conduct criminal investigations, 13 did not track employee use of non-federal FRT systems,” the analyst wrote in a note to clients.
Therefore, as the government intensifies its attention on overseeing the use of FRT data, Pérez Mora sees a revenue opportunity for Palantir. The analyst further highlighted Palantir’s response to criticism over the privacy rights issues raised by the usage of FRT data on its platforms.
“The amount of data generated by these types of sensors is rapidly increasing and the need for granular access controls provides significant opportunities for technologies like Palantir’s. Most of us are probably reading this from a device that required some kind fingerprint or facial recognition and our license plate was captured several times on our way to a 4th of July vacation,” Mora wrote in a client note.
Summary
Palantir stock price is down sharply this week after the software company offered soft guidance, prompting several analysts to cut price targets to reflect lower revenue estimates.
