Story Stocks^®

For back-to-back quarters, Palantir Technologies (PLTR +21%) delivered beats on its top and bottom lines in Q3 and forecasted upbeat Q4 revenue figures. Not much has been able to slow PLTR down this year as the stock tacks on roughly +200% gains YTD following today's explosive move. As an AI software developer founded as a CIA-funded startup two decades ago, artificial intelligence has underpinned PLTR's exceptional appreciation this year. Commercial enterprises and governments, from the U.S. to its allies, are latching onto the surging popularity of AI, supporting PLTR's accelerating growth in Q3 and its third consecutive quarter projecting energetic quarterly revenue guidance.

• PLTR's top line continued to accelerate, advancing by 30% yr/yr to $725.52 mln, supporting its improving profitability, with non-GAAP EPS expanding by 43% yr/yr to $0.10. Total customer count continued to grow nicely, up 39% yr/yr and 6% sequentially to 629.
• U.S. government revenue has been ramping up in recent quarters. However, in Q3, the segment took a giant step forward, growing revs by 40% yr/yr and 15% sequentially to $320 mln, a seven-fold increase compared to the prior year and the best growth rate over the past 15 quarters.
  • International government revenue did not fare as well, growing by just 13% yr/yr and slipping by 5% from last quarter to $89 mln. However, this was expected as PLTR warned last quarter that the segment would be playing catch-up due to unfavorable deal timing.
• The commercial side was the showcase in Q3. Like U.S. government, U.S. commercial revs shifted into a higher gear, registering 54% growth yr/yr, up from the +33% delivered last quarter, to $179 mln. Management mentioned that this business is enjoying unprecedented demand as the company's AIP offering (AI software) drives new customer conversions and existing customer expansions. Commercial customers swelled by 77% yr/yr compared to 37% growth in the year-ago period.
  • Internationally, commercial revs inched just 3% higher yr/yr and declined by 7% from last quarter to $138 mln, resulting from ongoing headwinds in Europe and a step-down in revenue from one enterprise in the Middle East.
• PLTR's Q4 revenue forecast of $767-771 mln, translating to roughly 26% growth yr/yr at the midpoint, underscores sustained AI demand. U.S. commercial revenue is expected to hold its impressive growth rate, with PLTR predicting at least a 50% jump yr/yr next quarter. Outside of revenue, management lifted its other financial targets for the year, including adjusted income and free cash flow.

Riding the AI wave kickstarted by NVIDIA (NVDA) over a year ago, PLTR has been on an unstoppable journey to all-time highs since. The company's quarterly revenue growth has consistently improved since last year, supporting a steady bump in profitability, ultimately leading to its inclusion in the S&P 500 last quarter. Without any cracks in AI appearing, PLTR remains in an excellent position to extract further gains as it showcases its technological advantage in the increasingly lucrative AI space.