On the heels of a tough week for software stocks, Palantir Technologies Inc. came in just above expectations with its latest quarterly revenue performance, but shares of the data-software company were falling in Monday action.
was off 12% in midday trading Monday as analysts and investors saw some negative signals in the company’s most recent results, including a deceleration in revenue and a decline on an earnings metric relative to a year before.
The company generated $477.9 million in revenue during the third quarter, up from $392.1 million a year before, while analysts had been projecting $474.7 million.
“The sustained increase in interest and orders for our software products, particularly in the United States, comes not in spite but because of the current moment of austerity and tightening credit conditions,” Chief Executive Alex Karp said in a letter to shareholders.
However, William Blair analyst Kamil Mielczarek noted that Palantir’s 22% growth rate in the latest period marked a deceleration from the second quarter and from the year-ago third quarter.
U.S. revenue was up 31% to $297 million. U.S. commercial revenue was up 53% from a year before, while U.S. government revenue was ahead 23%.
Chief Business Affairs Officer Ryan Taylor told MarketWatch that Palantir was “seeing the mission we’re focused on on the government side and then the momentum and scale on the U.S. commercial side.”
But the U.S. commercial business decelerated as well, noted William Blair’s Mielczarek. It was up 120% in the second quarter.
“Palantir’s commercial revenue growth was boosted by its highly publicizedSPAC investments in the third quarter and fourth quarter of 2021, but that source of growth has ceased,” he wrote.
Palantir executives during the company’s prior earnings call expressed frustration over the timing of large government deals. This time around, Chief Financial Officer David Glazer told MarketWatch that the company’s government revenue, which exceeded $1.02 billion on a trailing-12-month basis during the third quarter, largely reflected renewals, expansions, and other “things we were expecting,” rather than “some of the work that we do hope will come.”
Karp added on the earnings call that Palantir has had “kind of lumpy growth and flatness, which no one likes,” but that he thought U.S. government revenue would again come to “look more like the traditional baseline of 35% than the baseline of this year of upper 20s.”
Executives reiterated their full-year revenue forecast, which ranges from $1.900 billion to $1.902 billion, “despite a negative $6 million currency impact since our prior quarter’s guidance.”
For the fourth quarter, executives anticipate $503 million to $505 million in revenue after “factoring in a negative $5 million currency impact since our prior quarter’s guidance.” Without those currency impacts, the company would have anticipated $508 million to $510 million in revenue, it said in the earnings release.
The FactSet consensus was $507 million in fourth-quarter revenue.
“This implies that revenue growth will further decelerate to 17% in the fourth quarter,” Mielczarek wrote.
RBC Capital Markets analyst Rishi Jaluria added that Palantir’s “revenue guidance was disappointing” as the fourth-quarter guidance fell below the consensus view and the full-year forecast was maintained, though he acknowledged that the company was seeing impacts from foreign exchange.
The company reported a net loss of $123.9 million, or 6 cents a share, whereas Palantir logged a net loss of $102.1 million, or 5 cents a share, in the year-ago quarter. Palantir posted adjusted earnings per share of 1 cent, whereas analysts were expecting 2 cents.
The company also generated adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) of $87.2 million, down from $119.2 million a year prior but ahead of the FactSet consensus, which was for $60.2 million.
“Palantir is seeing margin pressure as it pursues complex Department of Defense programs and as it increases its reliance on partners,” Mielczarek wrote.
Palantir executives now anticipate $384 million to $386 million in adjusted income from operations, whereas their prior forecast was for $341 million to $343 million.
Looking to the fourth quarter and into next year, the company is going to be “managing with discipline,” according to Glazer.
Executives maintained that Palantir’s financial positioning and business focus are strengths in the current climate. Palantir has $2.4 billion in cash with no debt and an eight-quarter streak of positive free-cash flow, said Glazer. Additionally, “some of the biggest catalysts for the business have been in really hard times.”
While executives “can’t talk about it too much,” Palantir is “involved in events that are transpiring in Europe,” he noted.