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By registering another impressive report in Q2, Palantir Technologies' (PLTR +10%) recent dip proved brief as shares snap back to life today. Initially a CIA-funded startup over 20 years ago, the AI software developer posted healthy top and bottom-line upside in Q2, leading to its raised FY24 revenue forecast. Unlike last quarter, when adjusted EPS met analyst expectations, PLTR squeaked out a beat in Q2. Furthermore, PLTR was coming off a roughly 20% correction from peak to trough over the past week, allowing upbeat results to provide a huge sigh of relief. Also, it helps that amid a broader market pullback, PLTR results demonstrated that the demand for AI remains robust.

The central theme in Q2 was that PLTR is currently capitalizing on its experience transitioning an organization or government agency from AI prototyping to production. Management repeated that the market is bottlenecked regarding the current transition, discovering the challenges associated with moving from creating an AI prototype, which PLTR characterized as making a PowerPoint presentation, to getting it into production, which produces material benefits.

• PLTR's competitive edge stood out in Q2. The company maintained its accelerating top-line growth, posting a 27.2% jump yr/yr to $678.13 mln, up from +20.8% in Q1 and +19.6% in 4Q23. The numbers came on expanding adjusted operating margins, supporting an 80% pop in adjusted EPS yr/yr to $0.09. On a GAAP basis, PLTR delivered its seventh straight quarter of profitability.
• Consistent with PLTR's forecasts, government revenue continued to ramp, climbing by 23% yr/yr and 11% sequentially to $371 mln. PLTR was selected for several significant U.S. awards during the quarter, leading its best U.S. government bookings quarter since 2022.
• Meanwhile, commercial revenue continued to grow briskly, moving 33% higher yr/yr and 3% sequentially to $307 mln. When excluding the adverse impact of strategic commercial contracts, the segment recorded 40% yr/yr revenue growth, the same as last quarter. Customer count increased by 41% yr/yr and 7% sequentially to 593; trailing 12-month revenue from PLTR's top-20 customers expanded by 9% yr/yr to $57 mln per customer.
  • Headwinds in Europe persisted in Q2, keeping international commercial revenue growth at just 15% yr/yr to $148 mln. However, to help offset this problem, PLTR continues to pounce on targeted growth zones across Asia and the Middle East.
• Similar to last quarter, PLTR hiked its FY24 revenue outlook despite dealing with issues in Europe, projecting $2.742-2.750 bln from $2.677-2.689 bln. The company also maintained its expectation of delivering positive GAAP operating and net income in each quarter of FY24.

PLTR's Q2 report was a breath of fresh air investors needed after a quick correction over the past few trading sessions. We mentioned that the pullback after Q1 results in May offered a compelling entry point for buy-and-hold investors. Following an uplifting Q2 performance, we continue to like PLTR as a standout AI play. The company has proven its differentiation in a sea of AI stocks, particularly with its ties to the U.S. government but also by constantly expanding its portfolio of private companies.