palantir

Palantir stock is trading sharply lower in US premarket price action today after the company released its earnings for the second quarter of 2022. It posted a surprise loss in the quarter and also lowered its 2022 guidance.

Palantir reported revenues of $473 million in the second quarter which were 26% higher YoY and were above the $466 million that analysts were expecting. The company does business which both governments as well as the private sector. Its Commercial revenues increased 46% YoY with US commercial revenues rising 120% over the period.

US government revenues rose 27% YoY during the quarter while the total US revenues increased 45% to $290 million in the quarter. The company’s US revenues on a trailing 12-months basis have now surpassed $1 billion. The company has been adding new commercial customers in the country and during the quarter it had 119 private customers in the country—up 250% YoY.

Palantir used to get most of its revenues from governments but some stockholders were not too pleased with the over-reliance on government business. The company has gradually been increasing its revenue share from the Commercial business also which would help in a more diversified business model.

Palantir went public in 2020 and opted for a direct listing instead of a traditional IPO or SPAC reverse merger. Like all newly listed companies, Palantir stock has also crashed and trades at a fraction of its 2021 highs. The stock was also popular among Reddit traders who helped trigger a short-squeeze rally in the stock.

However, the meme stock rally has since faded as investors have been shying away from speculative stocks and richly-valued growth companies.

Palantir Cuts 2022 Forecast

Palantir lowered its guidance during the earnings release. For the third quarter, it guided for revenues between $474-$475 million and adjusted operating income between $54-$55 million. For the full year 2022, it now expects revenues between $1.9-$1.902 billion and an adjusted operating income of $341-$343 million.

Commenting on the guidance Palantir said, “This revised guidance excludes any new major U.S. government awards and we believe this to be the base case.”

The earnings season has been quite mixed so far. On Friday, Lyft stock soared on better-than-expected earnings. Rival Uber had also soared after the company posted its first free cash flows.

Overall, markets have quite tepid expectations from companies this earnings season and have been forgiving of slight earnings misses. For instance, both Alphabet and Microsoft stocks rose despite earnings misses. However, Meta Platforms fell as it reported the first YoY revenue fall since it went public.

Markets have been more concerned about the commentary on guidance, which was reasonably strong for both Microsoft and Alphabet. Amazon’s earnings stood out as the company not only posted earnings and sales beat but was most optimistic on the outlook among all FAANG peers.

Coming back to Palantir’s earnings, it posted an adjusted loss from operation of $42 million, which was around 9% of its sales. However, its adjusted free cash flows of $61 million were 13% of its sales. The company’s operations are cash-rich unlike some of the other newly listed companies which burn cash every quarter.

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