The Most Important Number in Palantir's Earnings Report Was 134%

Palantir Technologies (NASDAQ:PLTR) scored another beat-and-raise earnings report for the second quarter, announcing results after the market close today that exceeded analysts’ expectations. Palantir raised its full-year guidance again, now calling for $8.154 billion in revenue.

But the biggest number to me was 134% -- the expected full-year growth rate for Palantir’s U.S. commercial revenue. Palantir has long been a key government contractor, but its ability to quickly expand its commercial segment will continue to drive its growth.

Palantir stock was up 13% in after-hours trading. Let’s delve into the report.

Image source: The Motley Fool.

Palantir has another great quarter

Palantir has been one of the fastest-growing companies in the market since 2023, when it rolled out its game-changing Artificial Intelligence Platform (AIP), which integrates with large language models, allowing users to submit queries in natural language, automate tasks, or have artificial intelligence propose and complete them. It made Palantir’s powerful systems, which collect data from thousands of sources to provide real-time AI-powered insights, much more accessible.

And I continue to be impressed that three years after that rollout, Palantir is actually accelerating its revenue growth. Overall revenue for the company was $1.94 billion, up 93% from a year ago, and beating the consensus estimate from analysts surveyed by Yahoo! Finance of $1.81 billion.

U.S. commercial revenue increased 149% from a year ago to $764 million, and U.S. government revenue jumped 93% from a year ago to $809 million. Net income topped $1 billion for the first time, reaching $1.06 billion, and adjusted earnings per share of $0.41 topped analysts' expectations of $0.35 per share.

“Put simply, we have now generated more profit in a single quarter than we did in total revenue in the same period the year before,” CEO Alex Karp said.

Palantir closed 220 deals in the quarter worth at least $1 million; of those, 73 were valued at least $10 million, and 98 were valued at least $5 million each. Overall, Palantir closed contracts with a total market value of $3.37 billion for the quarter, the highest in its history.

Why commercial revenue matters

Palantir built its reputation as a military contractor. Karp has been proud of the company’s military background, saying earlier this year: “Palantir was founded to strengthen U.S. national security, to protect Americans and their freedom. We have done so across Democratic and Republican administrations, and on behalf of all Americans, with deep pride.”

But being a military and government contractor can only take a business so far. There are contractors like Lockheed Martin and General Dynamics that do a ton of business with the government but don’t have market caps above $120 billion or so. Palantir has topped that already.

The key to building a business that can achieve extraordinary growth is to grow a commercial business. And it’s been able to do that through its AIP.

Palantir has now grown its U.S. commercial business by more than 100% for four consecutive quarters. And that rate of growth is accelerating, even faster than U.S. government growth.

Source: Palantir.

On a quarter-by-quarter basis, our U.S. commercial business grew 28%. Such growth -- indeed, such acceleration -- gives the impression that what others might require a year or even longer to achieve, we can do in 90 days,” Karp said.

“While our U.S. commercial business is on fire, we believe it is nonetheless just nascent.”

Palantir’s full-year guidance calls for U.S. commercial revenue of $3.424 billion, representing growth of 134%. Palantir’s growth story is just getting stronger, and that’s why the stock is up big after-hours today.

Patrick Sanders has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.