Palantir Technologies Inc. (PLTR.US) reported robust first-quarter results on Tuesday, with revenue climbing 85% year-over-year to $1.63 billion, marking its fastest growth rate since going public in 2020. Net profit surged nearly fourfold, and the company significantly raised its full-year guidance. However, U.S. commercial revenue slightly missed expectations, casting a minor shadow over the otherwise strong report. In after-hours trading, the stock was down 2.53%.
The company's performance far exceeded Wall Street forecasts. Revenue of $1.63 billion beat the average analyst estimate of $1.54 billion. Adjusted earnings per share came in at $0.33, 18% higher than the expected $0.28. Net profit jumped to $870.5 million from $214 million a year earlier.
This quarter represented Palantir's highest revenue growth since its direct listing. Chief Executive Officer Alex Karp stated in a shareholder letter that the financial performance "eclipses that of any software company of comparable scale in history." He also revealed that annualized revenue per employee has reached $1.5 million.
Profitability showed significant strength. After adjusting for stock-based compensation and certain tax effects, the company's underlying profit metrics improved markedly. Palantir also raised its full-year adjusted free cash flow guidance to a range of $4.2 billion to $4.4 billion, above market expectations of $4.05 billion and higher than its previous forecast from February.
The U.S. market was the primary growth driver, contributing $1.28 billion in revenue, which accounts for 78.5% of the total. U.S. business revenue doubled over the past 12 months.
U.S. government business revenue accelerated to $687 million, an 84% increase year-over-year, outpacing the previous quarter's 66% growth and exceeding analyst estimates of $610.5 million. Palantir's partnership with the U.S. Department of Defense continues to deepen. In March, the Pentagon expanded its use of Palantir's Maven AI system, a platform that analyzes battlefield data and aids in targeting and command decisions, which has been deployed in U.S. military operations in the Middle East. The company also secured a 10-year U.S. Army contract last year valued at up to $10 billion. Other federal agencies, including the Department of Homeland Security and the Department of Agriculture, are also clients. CEO Karp emphasized the company's commitment to supporting U.S. military personnel when they are in danger.
U.S. commercial revenue grew 133% year-over-year to $595 million but fell slightly short of the $605 million analysts had anticipated. Although the miss was relatively small, it drew attention in a market environment that is highly demanding of high-growth stocks. During the quarter, Palantir announced new partnerships with major companies including Airbus, Bain & Company, GE Aerospace, Stellantis, and NVIDIA. The total number of commercial customers reached 1,007, a 31% increase from a year ago. The company completed 206 deals worth at least $1 million each, with 72 deals over $5 million and 47 exceeding $10 million. The remaining performance obligation, representing contracted revenue not yet recognized, stood at $4.45 billion as of March 31, significantly higher than the $1.9 billion a year prior.
Buoyed by the strong first quarter, Palantir raised its full-year outlook. The revenue forecast was increased to a range of $7.65 billion to $7.66 billion, representing approximately 71% growth. The full-year growth rate for U.S. commercial revenue was raised to 120%, equating to about $3.22 billion. Second-quarter revenue guidance was set at $1.8 billion, above the consensus estimate of $1.68 billion. CEO Karp also provided a longer-term signal, projecting that the U.S. business, encompassing both government and commercial segments, will double again by 2027. Based on the current annual U.S. revenue run rate of around $5 billion, this implies the U.S. market alone could generate over $10 billion in revenue within two years. Karp sought to differentiate Palantir from pure-play AI model companies, describing Palantir as a powerful commercial machine delivering tangible results, rather than being engaged in the highly competitive and rapidly changing AI model space.
Despite the impressive figures, the report contained some cautionary signals. The slight miss on U.S. commercial sales is not the first occurrence, and the market remains highly sensitive to this metric. While 133% growth is exceptional, consistent future shortfalls could challenge the stock's premium valuation. Competitive pressures are also intensifying. Analysts have warned that as AI technology lowers development barriers, competitors are accelerating the launch of similar data analysis and decision-making platforms. While Palantir has historically benefited from high switching costs due to its proprietary ontology-based architecture, the proliferation of AI could erode this advantage. Furthermore, AI model companies are increasingly targeting enterprise clients, creating budget competition.
Despite a significant rally since late 2022, Palantir's stock is down approximately 18% year-to-date prior to the earnings release, partly reflecting broader investor concerns that AI models could disrupt traditional software business models, leading to sector-wide selling pressure.
Political and ethical controversies persist. Palantir's deep ties to U.S. government agencies, particularly in defense and immigration enforcement, where its technology is used for sensitive operations, have drawn criticism from some pension funds and lawmakers. This "patriotic" positioning, while securing government contracts, continues to pose reputational risks.