What Happened?

Shares of data-mining and analytics company Palantir (NYSE:PLTR) jumped 22.9% in the morning session after the company reported a "beat and raise" quarter. Third-quarter results blew past analysts' revenue and EBITDA expectations. Sales improved during the quarter due to solid demand for Palantir's AI offerings (powered by its artificial intelligence platform) across the U.S. government and commercial sectors and more efficient scaling of solutions from prototypes to production. 

The U.S. market, in particular, demonstrated strong growth with commercial revenue up 54% year-over-year, driven by large deals and increasing customer counts, while the government segment achieved a 40% increase, supported by new AI-driven contracts. Palantir also raised its full-year revenue and adjusted operating income guidance, suggesting the improved momentum might be maintained heading into the last quarter of the year. 

Overall, this was a very good quarter, highlighting steady and strong execution for a company that many are skeptical of due to its large, lumpy contracts and premium valuation.

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What The Market Is Telling Us

Palantir’s shares are quite volatile and have had 19 moves greater than 5% over the last year. But moves this big are rare even for Palantir and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 9 months ago when the stock gained 28.5% on the news that the company reported fourth-quarter results with expectations for revenue growth to accelerate in the next fiscal year, highlighting growing demand for its new artificial intelligence platform (AIP), which was launched in 2023. 

It was also encouraging to learn that the company has improved the time it takes to deploy AIP and integrate with client's data from "weeks and months to as little as a few hours." 

The icing on the cake is adjusted operating income well above expectations, showing that the company is not sacrificing profits for the higher topline growth. Also, its revenue, billings, and free cash flow exceeded Wall Street's expectations in the quarter, and its gross margin improved. Notably, the US commercial business significantly contributed to the solid performance during the quarter, as revenue in the segment grew 70% year on year and 12% sequentially. 

Looking ahead, the company expects the US commercial business to grow at least 40% in 2024. A minor negative was that revenue guidance for the next quarter missed analysts' expectations. Overall, this was a very solid quarter for Palantir.

Palantir is up 205% since the beginning of the year, and at $50.55 per share, has set a new 52-week high. Investors who bought $1,000 worth of Palantir’s shares at the IPO in September 2020 would now be looking at an investment worth $5,322.

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