Palantir (PLTR) Surges 15% After Blowout Q2: Revenue +93%, US Commercial +149%, Guidance Raised to $8.15B

Phenomenal main stream revenues at $1.935 billion, up 93% year over year and a sequential growth of 19%. The US commercial revenue was $764 million (up 149% year over year and 28% sequentially) and outpaced Q1's 133% growth. US government revenues were up 90% to $809 million. Total US revenues for the year were $1.573 billion, up 115% year over year, and accounted for 81% of the

Profitability was as impressive as it was strong. GAAP operating income was $912 million (47% margin) while adjusted operating income was $1.194 billion (62% margin). GAAP net income crossed the $1 billion mark for the first time coming in at $1.062 billion (55% margin). Both GAAP and adjusted EPS were at $0.41. Operating cash flow was $1.216 billion (63% margin) and built a $9.2 billion cash and Treasury reserve. The historic Rule of 40 score Palantir achieved was 155.

Param Singh from Oppenheimer believed that Palantir would need to set guidance at or above $7.83 billion to drive a positive stock reaction. Palantir’s new guidance for the year fell in at $8.15- 8.158 billion. Further, US commercial guidance was set at $3.424 billion from a prior $3.224 billion and Q3 guidance of $2.160 - $2.164 billion indicates further positively surprise results.

The Motley Fool's article published on 31 July 2022, gave an incorrect prediction of a 15% stock decline for Palantir the following Monday (August 4th) based on a 61X Price to Sales valuation. The stock actually increased 15% after hours and exceeded the 11.6% (implied) options movement. This was due to positive surprise results of a 6.8% revenue beat, a 149% US commercial revenue growth figure, a first ever crossing of the $1 billion GAAP Net Income mark, and a total guidance lift of $490 million.

Palantir’s US commercial revenue reached $764 million in the last year, an annual growth rate of 149%. This is by far the most notable number from Palantir. This is critical for investors since the launch of the Applied Innovation Program (AIP). The primary concern investors have is whether Palantir’s AI assets are used in actual deployments by enterprises beyond pilot programs. 

Recent years show a bright picture for Palantir. The US commercial TCV has been growing at an unprecedented pace, reaching $2.13 billion with a remaining deal value of $6.24 billion, more than double from last year. Considering this growth and the fact that Palantir is on a US commercial revenue growth trajectory of 380% compounded since 2024, Karp noted that Palantir is a company on a hyper-growth trajectory unlike any other at this scale.

This growth is nothing like the growth that any competitor has experienced in the enterprise AI software space. There has been no accelerated growth in commercial AI revenue for Salesforce or ServiceNow. Palantir’s AIP, which assists enterprises in deploying AI directly on their own data without the need for Palantir to access their data via external frameworks, may be a governance and security need that is unaddressed by any competitor at this level.

On the daily chart, PLTR has broken decisively above the symmetrical triangle with a gap from $125.65 to $144.45 after hours. The chart note at $145.33 reflects today's pre-market level. Both the 50 EMA ($127.32) and 100 EMA ($130.38) have been cleared in a single session. RSI near 80 is overbought after the sharp move. Resistance: $147.37 is the immediate level, followed by $153.01 and $158.10. The breakout zone at $136.45 is the first support on any pullback. Below $131.45, the recovery structure weakens.

Palantir Price Chart - Source: Tradingview

Key Levels

• After hours: +14.97% to ~$144.45 from $125.65 close. Chart note $145.33
• Q2 revenue: $1.935B vs $1.81B est (+6.8% beat). +93% YoY, +19% sequentially
• US commercial: +149% YoY to $764M. Record TCV $2.13B. Remaining deal value $6.24B (2x YoY)
• EPS: Adj $0.41 (beat $0.34 est). GAAP $0.41. First GAAP net income above $1B
• Full-year guide: Raised to $8.15B from $7.66B (+$490M). US commercial above $3.424B
• Rule of 40: Score 155. FCF $1.22B (63% margin). Cash $9.2B

Palantir beat consensus by $123 million (6.8%) on revenue. There were two main reasons for the beat. 

First, in Palantir's official guidance, management provided a rather pessimistic range of $1.797 billion to $1.801 billion. Palantir typically beats the midpoint of the guidance by 5% to 12%, and this time it was only under-modeled by analysts. 

Second, the US commercial revenue grew by 133% in Q1 and rose to 149% in Q2. The consensus was that the US growth would slow, but it actually sped up. The unexpected US growth was the main reason for the 15% post-earnings surge, which was more than 3 times the 11.6% options-implied move.

Rule of 40 is a software industry rule that looks at revenue growth and free cash flow margin. A good score would be anything above 40. Palantir’s score of 155, with 93% revenue growth and a 62% adjusted operating margin, is a number that has been unrecorded in the public software industry at a large scale. During their peak AI growth, Nvidia’s Rule of 40 score was sitting around 120. Salesforce has never touched 50. With a P/S ratio that will pull towards 50 when valuing the company at $8.15 billion with $8.15 billion in revenue, the Rule of 40 score is a great justification for that valuation.

Palantir's Q2 was exceptional. Results far exceeded expectations, and targets were routinely challenged, with the stock jumping 15% after hours. Revenue was 6.8% ahead of expectations, GAAP net income crossed $1 Billion for the first time, FCF was at $1.22 Billion with a 63% margin, and US Commercial revenue grew 149% to a new high. Full year guidance was increased by $490 million to $8.15 billion. 

With the stock price at $145, the symmetrical triangle has been broken, and the two EMA's have been cleared. RSI is at 80 which is overbought. The next resistance is $147.37; above that $153 and $158. The support breaks out at $136.45, which is a new low. 

Karp's CNBC quote, 'forget consensus,' captures the result accurately. Whether the P/S multiple is sustainable at 50 times is still a legitimate question. Whether the business is extraordinary is no longer debatable.