(Reuters) – Shares of Palantir rose more than 12% on Tuesday after the data analytics company raised its annual revenue forecast for a third time, boosting investor confidence that the artificial intelligence boom will boost demand for its services fueled.
The company is among the biggest stock market winners of the generative AI boom, with its stock more than doubling in value this year – a rally that has raised concerns about its steep valuation.
But Palantir’s results late Monday allayed some of those fears as demand surged thanks to its AI platform, which is used to test, debug and evaluate AI-related scenarios, as well as its government-focused services that include software to visualize army positions. .
Palantir raised its 2024 revenue forecast to $2.805 billion to $2.809 billion from $2.742 billion to $2.750 billion.
For the third quarter, the company saw U.S. government contract revenue increase 40%, which accounted for more than 44% of total revenue of $725.5 million.
“We see a long run of growth in the government sector, driven by massive demand for AI-first solutions in government functions such as the military and healthcare,” Morningstar analysts said.
But the analysts warned that the recent rise in the share’s value means that “any bump in the road, such as sales execution challenges or weaker-than-expected sales growth or expectations, could materially impact the valuation of the share”.
If premarket gains continue throughout the day, Palantir is expected to add $12 billion to its market value.
It trades at a price-to-earnings ratio of 95.43, compared to 25.60 for peer Oracle and 126.92 for Snowflake.
Palantir stock has outperformed the S&P 500 index this year. It was added to the benchmark index at the end of September.
(Reporting by Zaheer Kachwala in Bengaluru; Editing by Shilpi Majumdar)
