Palantir earnings: What to expect from the software company riding the AI wave

Palantir Technologies Inc.’s stock has been among the biggest riders of the artificial-intelligence wave this year, and investors are about to find out how that craze has impacted its financials.

Given a huge run-up in Palantir shares

so far in 2023, with the name up 183% on the year, one analyst is adopting a wait-and-see stance ahead of Monday’s earnings, which come out after the closing bell.

Jefferies analyst Brent Thill thinks earnings “expectations are achievable, but offer limited upside as there are still several unknowns in the business.”

Thill listed the recovery timing of Palantir’s U.S. government business, the durability of its U.S. commercial growth and the pricing strategy for the company’s AI Platform as some of the uncertainties.

All of these “could cause near-term choppiness in the financials,” wrote Thill, who has a hold rating on the stock and a $17 price target.

Read from late July: Palantir is ‘the Messi of AI,’ says analyst who thinks its stock can jump 45%

“Palantir has been one of the top beneficiaries of the AI wave, with its newly launched AI platform enabling a multimodal AI by combining existing predictive and causal AI insights with [large-language model] and [generative] AI capabilities,” Thill added in his report, though he said he’d prefer to stick to the sidelines “until more signs of business execution are shown.”

Monness, Crespi, Hardt & Co. analyst Brian White said he expects Palantir’s commercial activity “to remain susceptible to the vicissitudes of the economy, while the timing of closing deals in the government market has proven unpredictable with lumpy revenue recognition.”

Still, he thinks the company can continue its recent string of outperformance in the U.S. market. He rates the stock at neutral.

While many stocks have gotten boosts this year thanks to enthusiasm around AI, Palantir shares have seen some of the biggest gains. Other significant winners include shares of Nvidia Corp.
which will report results Aug. 23, Meta Platforms Inc.
which said in late July that AI was already helping the company deliver useful ad products that aid its monetization objectives, and Inc.

Read: Will AI do to Nvidia what the dot-com boom did to Sun Microsystems? Analysts compare current hype to past ones.

Palantir shares closed down 2.8% at $18.18 Friday, but they were still up 2.2% on the week.

On Monday, the company announced it had been selected by the Department of Defense to automate coordination of spectrum band licensing with commercial parties. 

Analysts surveyed by FactSet expect second-quarter earnings of 5 cents a share on revenue of $533.4 million. Analysts, on average, also forecast $301.9 million from government sales and $234 million from commercial sales.

Related: Palantir is well positioned for AI wave, but Mizhuo analyst isn’t ready to turn bullish on the stock yet

As for Palantir’s outlook for the third quarter, analysts estimate earnings of 5 cents a share on revenue of $553.1 million.

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