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Tuesday 10 May 2022

Palantir shares drop 21% on slowing growth

Palantir logoDespite Q1 revenue growth of over 30% year on year, shares in US data and analytics software provider Palantir Technologies dropped by 21% yesterday – their biggest fall since listing in September 2020 – as the markets reacted negatively to a lower than expected sales forecast and higher than expected losses.

Palantir remained unprofitable in its latest quarter, although losses shrank to $101m on a GAAP basis, or 5 cents a share, down from $123.5m (7 cents a share), in the same period a year ago. Total Q1 revenue grew 31% year-over-year to $446m, with the management expecting revenue in the current quarter to climb to $470m in its ‘base case’, below previous consensus estimates of $484m. However, there is a ‘wide range of potential upside’ to the guidance with the company well-positioned to benefit from developing geopolitical events. According to CEO Alex Karp, longer term we should continue to expect annual revenue growth of 30% or greater through to 2025.

Palantir saw strongest growth from the Commercial sector during the quarter, with total Commercial revenue up 54% y-o-y to $205m and US Commercial revenue 136% higher. By comparison, growth from government customers slowed to 16% with sales totalling $242m in Q1 – whilst better than the 6% analysts had expected, it is the slowest quarterly growth for the segment since the company listed. 

US government business has been central to Palantir’s evolution – with a 30% CAGR from the sector between 2013-2021 – and a dip in growth has unsettled nervous markets, but faced with an increasingly uncertain geopolitical future, Palantir expects government revenue to increase through the rest of the year. In the US, it has recently expanded deals with agencies including the US Centers for Disease Control and Prevention and National Institute for Health to track Covid-19 infections and has been strengthening its defence, intelligence and national security business. In the UK, it is already set to benefit from its NHS Covid-19 Data Store contract, as well as work with the Cabinet Office, Submarine Delivery Agency, and Navy Command. It is also fair to say that bad times are likely to be good for Palantir. As COO Shyam Sankar said on the results call: “As our customers confront rapidly escalating conflict in Eastern Europe, runaway inflation, disrupted supply chains and a new wave of refugees, our products have become more essential than ever”.

Posted by: Tola Sargeant at 09:57

Tags: results  

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