Palantir Technologies Inc. today reported better-than-expected second-quarter revenue, but its earnings per share and guidance missed analyst expectations.

The company’s shares declined by more than 12% on the earnings report.  

NYSE-listed Palantir sells software that enables organizations collect data from a large number of sources and analyze it for insights. The company also offers software tools that simplify application development. Palantir’s Apollo platform helps developers roll out code updates more efficiently, troubleshoot technical issues and perform related tasks.

Palantir originally sold its software primarily to government agencies such as the U.S. Defense Department. Over the years, the company has also established a significant presence in the private sector. Palantir counts major enterprises such as Fujitsu Ltd. and Swiss Re among its customers.

Palantir’s revenue reached $473 million in the second quarter after growing 26% year-over-year, which topped the $471.3 million projected by the Refinitiv consensus estimate. The company’s strong sales growth was driven in significant measure by its U.S commercial business. The business, which provides software for private sector organizations, increased revenues by 120% in the second quarter and expanded its customer base from 31 a year ago to 119.

“Our commercial business in the United States generated $297 million in revenue in the twelve months that ended on June 30, 2022,” Palantir chief executive officer Alex  Karp detailed in a letter to shareholders. “Of that $297 million, $268 million, or 90%, came from our newest customers. The remainder of $29 million was from early customers.”

Palantir’s revenue from U.S. government customers increased by 27% year-over-year in the second quarter. The company reported that overall U.S. revenue grew 45% year-over-year, to $290 million.

While Palantir’s sales topped the consensus analyst estimate, its earnings per share missed expectations. The company reported a $42 million loss from operations that translated into a loss of $0.01 per share, whereas analysts had expected a profit of $0.03 per share. Palantir chief financial officer David Glazer told CNBC that the loss was the result of a “decline in investments and marketable securities.”

For the third quarter, Palantir is projecting sales of between $474 million and $475 million. The company expects to close its 2022 fiscal year with total revenues of $1.9 billion to $1.902 billion. Palantir’s second quarter and full-year projections missed the FactSet consensus estimate, but the company stated that its guidance “excludes any new major U.S. government awards and we believe this to be the base case.”

In the shareholder letter, Karp indicated that the company expects strong customer demand for its software products going forward. “The development of the modern versions of our principal software platforms required an extended period of often intensive iteration with an early group of customers,” the executive wrote. “We have only recently begun to capture the value of those more refined and productized software platforms, a process that we believe will continue to accelerate.”

Photo: Cory Doctorow/Flickr

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