(Bloomberg) — Shares of Palantir Technologies Inc. soared to a record high after the company reported better-than-expected quarterly revenue and raised its forecast for operating income in the current period, citing high demand in the US for its artificial intelligence software.
The company’s stock jumped as much as 23% to $50.98 in New York on Tuesday, the highest level since the company was publicly listed in 2020.
Third-quarter sales increased 30% to $725.5 million, the Denver-based company said Monday in a statement. Analysts, on average, estimated $703.7 million, according to data compiled by Bloomberg. Palantir also reported net income of $144 million, a record for the company.
“The growth of our business is accelerating, and our financial performance is exceeding expectations as we meet an unwavering demand,” from government and commercial customers in the US, Palantir Chief Executive Officer Alex Karp wrote in a letter Monday to shareholders. “The world is in the midst of a US-driven AI revolution that is reshaping industries and economies, and we are at the center of it.”
The company raised its revenue guidance for 2024 to about $2.81 billion. Analysts expected $2.76 billion. It also reported a substantial increase on a closely watched metric: revenue from its US commercial business, a key driver of sales growth. Palantir expects its US commercial revenue to climb over 50% this year, to more than $687 million.
Co-founded by billionaire Peter Thiel, Palantir built its reputation working with the US national intelligence community, and is now used across all US military branches and by allied forces in Ukraine and Israel. Thiel made roughly $4 billion ($3.94 billion) on his Palantir stake this year. He reduced his stake by about one-third during the course of this year, including nearly 29 million shares sold in the third quarter.
Palantir’s share price soared after introducing new AI tools last year, becoming a marquee stock of a tech industry frenzy. The share price is up nearly 200% so far this year, fueled by demand for its AI software and events such as its recent inclusion in the S&P 500.
The firm delivered adjusted earnings of 10 cents a share in the period ended Sept. 30, beating analyst estimates of 9 cents. It projected fourth-quarter adjusted operating income of about $300 million, compared with the average estimate of $261.6 million.
Although Palantir counts global organizations like energy giant BP Plc and the UK’s National Health Service among its customers, demand overseas for its AI software has been weak compared with the US. The company said $499 million of its revenue for the third quarter, about 70%, came from American customers.
“The US is driving the AI revolution we’re seeing,” said Chief Revenue Officer Ryan Taylor during a Monday interview. Taylor said Palantir closed 104 deals over $1 million during the third quarter, thanks largely to its unconventional sales strategy of holding boot camps to teach customers to use its tools.
US commercial business grew 54% to $179 million during the quarter, and US government business increased 40% to $320 million compared with the same period a year earlier.
On a call with analysts Monday, Palantir credited defense spending for helping boost its US government business to the highest quarterly growth in nearly four years. Although the US intelligence community was among Palantir’s first clients, winning large government contracts has taken the better part of two decades, with partnerships now playing a bigger role. Palantir hired former GOP leader and China hawk Mike Gallagher to lead its global defense team in August.
Palantir also expanded a partnership with Microsoft Corp. in August so that it could use OpenAI — one of several large language models Palantir deploys in its AI platform — in classified environments.
On the Monday call, Karp also touched on the topic of retail investors, who are among Palantir’s most enthusiastic supporters — endowing the company with near-GameStop levels of reverence on the subreddit r/PLTR. “Our individual investors are near and dear to our, and certainly my, heart,” he said. “And you know I love it that you guys are winning.”
–With assistance from Tom Maloney.
(Updates with post-open share move in the second paragraph and detail about Peter Thiel’s stake in the sixth paragraph.)
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