Shares of Palantir ( PLTR ) rose more than 20% early Tuesday after third-quarter earnings beat expectations thanks to better-than-expected U.S. government spending on its AI technology.
Global government spending on Palantir’s products, mainly from the US, rose 40% year-over-year to $408 million in the third quarter, accounting for 56% of the company’s total revenue for the period. This was higher than the $379 million expected for the segment, according to Bloomberg consensus estimates.
Palantir, which makes a range of data mining and analytics software including its Artificial Intelligence Platform (AIP), recently won a $100 million US military contract in September for its AI tools that identify targets for airstrikes.
“The AI revolution is happening now,” Palantir Chief Revenue and Legal Officer Ryan Taylor said on a call with investors late Monday. “The gap between the AI haves and the have-nots is rapidly widening and the whole world is watching.”
Taylor said Palantir’s U.S. government business saw its “strongest sequential growth in 15 quarters, largely driven by our DoD [Department of Defense] business growth of 21% quarter-on-quarter.”
Meanwhile, Palantir’s revenue from commercial ventures fell short of expectations, coming in at $317 million, compared to the expected $317. Its corporate customers include oil and gas giant BP (BP), CBS Broadcasting and General Mills (GIS). The company said sales were affected by “a decline in revenues from a government-sponsored venture in the Middle East.” Palantir did not respond to a request for further details from Yahoo Finance.
Overall, the company reported adjusted earnings per share of $0.10 for the quarter, a penny above expectations, and revenue of $725.5 million, which exceeded the $703.7 million expected by Wall Street analysts was expected.
Palantir shares are up more than 190% since the start of the year, fueled by a broader boom in artificial intelligence and the US government’s growing interest in AI warfare technologies. The stock was added to the S&P 500 in September.
“Palantir is among a handful of infrastructure software companies that have started meaningfully monetizing generative AI,” Deutsche Bank (DB) analyst Brad Zelnick wrote in a note to investors on Monday.
While recognizing Palantir’s benefits, Wall Street analysts were generally skeptical about the stock’s surge. On average, they see the shares falling to $32.81 over the next year, according to Bloomberg data, with about half of analysts tracked by Bloomberg recommending selling the shares. Zelnick himself has a sell rating for the stock and sees the shares falling to $26. Shares were around $50 Tuesday morning.
