Q4 2024 Earnings Summary
- Palantir thrives during periods of disruption, and the anticipated focus on efficiencies, software modernization, and digitalization in government positions the company to benefit significantly from increased demand in the sector.
- Growing interest in partnerships reflects increased recognition of Palantir's value. For the first time, companies are initiating real partnership discussions, especially those needing to deliver results under pressure, which could open new growth avenues.
- Palantir's unique culture and focus on exceptional talent allow it to build superior products efficiently, contributing to high margins. The emphasis on attracting and retaining people who think differently enables the company to "crush the margins" and stay competitive.
- Uncertainty in Government Business Due to Policy Changes: Palantir executives acknowledge uncertainty regarding the impact of the Department of Defense's new initiatives (DOGE) and changes in administration. Shyam Sankar states, "I mean, I think no one really knows...," highlighting potential risks to future government contracts and revenues.
- Increasing Expenses from Growing Headcount: The company plans to invest in quality engineering talent to meet demand, which will result in an increase in headcount. David Glazer mentions, "And obviously, that does mean headcount is going to grow somewhat...," indicating potential pressure on operating margins due to rising operating expenses.
- Weak Growth in International Markets: Palantir is experiencing slower growth in international regions, particularly Europe. Alexander Karp notes, "We're growing around 4% on 13% of our company...," contrasting sharply with the stronger growth in the U.S. market. This reliance on U.S. growth may pose a risk if domestic expansion slows down.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +36% | Total revenue increased to $827.57 million driven by strong expansion in both government (+40%) and commercial (+31%) segments. This robust growth reflects higher product adoption and demand improvements compared to Q4 2023. |
Government Revenue | +40% | Government revenue rose to $455.13 million due to increased adoption of Palantir’s solutions among public-sector clients, supported by new awards and favorable deal timing in an environment of rising AI demand, building on previous trends noted in Q4 2023. |
Commercial Revenue | +31% | Commercial revenue reached $372.33 million as a result of a broadening commercial customer base and stronger demand for AI solutions, indicating successful market expansion relative to Q4 2023. |
United States Revenue | +51% | U.S. revenue climbed to $557.62 million driven by substantial growth in both government and commercial sectors, reflecting intensified domestic demand and successful capitalizing on AI-related initiatives compared to Q4 2023. |
Rest of World Revenue | -39% | Rest of World revenue dropped to $111.8 million due to a shift in revenue mix as U.S. business accelerated; slower international growth compared to Q4 2023 led to its lower contribution (from 27% to 21% of total revenue). |
Operating Income | +72% | Operating income increased to $112,869 thousand by benefiting from improved margins and effective cost management, which amplified the positive impact of higher revenue relative to Q4 2023. |
Net Income | -12% | Net income declined to $79,009 thousand despite higher operating income; rising SG&A and R&D expenses, among other cost pressures, partially offset revenue gains leading to a reduced bottom line compared to Q4 2023. |
Basic EPS | -20% | Basic EPS dropped to $0.04 as the decline in net income and potential dilution effects outweighed the operating improvements seen in prior period, resulting in a lower per-share profit compared to Q4 2023. |
SG&A Expenses | +45% | SG&A expenses increased to $470,441 thousand mainly driven by a significant rise in stock-based compensation and payroll-related costs, reflecting an investment in scaling operations and supporting growth initiatives compared to Q4 2023. |
R&D Expenses | +57% | R&D expenses grew to $171,502 thousand as heightened investment in technology innovation and AI product development drove increased spending, a strategic move beyond the lower R&D outlay in Q4 2023. |
D&A Expenses | -12% | Depreciation and Amortization expenses declined to $7,006 thousand due to more matured capital assets and deliberate asset management improvements reducing the annual expense compared to $7,972 thousand in Q4 2023. |
Net Change in Cash | Shift from –$211,779 thousand to +$1,269,829 thousand | Net change in cash turned strongly positive as operating cash flow improved markedly and investing outflows were reduced, aided by higher financing inflows from option exercises, a turnaround from the negative cash change seen in Q4 2023. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q1 2025 | no prior guidance | $858M – $862M | no prior guidance |
Adjusted Income from Operations | Q1 2025 | no prior guidance | $354M – $358M | no prior guidance |
Revenue | FY 2025 | no prior guidance | $3.741B – $3.757B | no prior guidance |
U.S. Commercial Revenue | FY 2025 | no prior guidance | in excess of $1.079B | no prior guidance |
Adjusted Income from Operations | FY 2025 | no prior guidance | $1.551B – $1.567B | no prior guidance |
Adjusted Free Cash Flow | FY 2025 | no prior guidance | $1.5B – $1.7B | no prior guidance |
GAAP Operating Income and Net Income | FY 2025 | no prior guidance | expected in each quarter | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Reliance on government contracts and policy changes (including DOGE) | Briefly acknowledged in Q2 for strong U.S. government business but no direct DOGE mention; no references in Q1 or Q3. | Executives explicitly addressed reliance on government contracts and policy changes (including DOGE), expressing optimism in Q4. | New emphasis |
Differences in U.S. vs. international growth | Consistently noted in Q1, Q2, and Q3, highlighting stronger growth in the U.S. vs. slower international adoption. | Q4 call reiterated stark U.S. outperformance and “anemic” international growth. | Recurring topic; U.S. lead persists |
AI-focused solutions (AIP, enterprise production AI) | Major focus throughout Q1, Q2, and Q3, driving new deals and expansions. Palantir positioned AIP as central to production AI use cases. | Q4 underscored customer success stories (e.g., cutting processes from days to minutes) and AIP’s role in the AI revolution. | Ongoing major focus |
Warp Speed manufacturing OS | Introduced in Q2, briefly referenced in Q3 as part of reindustrialization efforts. | Continues in Q4 with first cohort of manufacturers, integrating engineering, test, production, and quality. | Expanding from Q2 introduction |
Expanding partnerships with major firms and hyperscalers | Mentioned only in Q1 (e.g., Oracle collaboration), with no subsequent references in Q2 or Q3. | No mention in Q4. | Declining mention |
Talent acquisition, headcount growth, and company culture | Limited detail in prior quarters; slight note in Q3 about investing in technical talent. | Q4 emphasized hiring quality engineers and preserving Palantir's unique culture. | Reemerged |
Implementation and scaling challenges | Q1 and Q2 highlighted complexities in moving AI from prototype to production; Q3 focused on success rather than challenges. | Q4 stressed rapid adoption and minimal barriers, with customers quickly scaling AI solutions. | Shift from challenge to success |
Stock-based compensation and margin pressure | Recurring in Q1, Q2, and Q3, with GAAP profitability achieved despite SBC. | Q4 reported $282M SBC but also highest adjusted margins, indicating managed impact. | Consistent discussion |
Geopolitical positioning influencing customer and employee retention | No direct references in Q1, Q2, or Q3. | Not mentioned in Q4. | Not discussed |
-
Investment Focus
Q: Where will you invest to meet demand?
A: Palantir plans to focus on hiring quality engineers to capture the growing demand, with headcount expected to grow somewhat. The company emphasizes investing in its unique culture and talent to deliver on important missions, rather than simply increasing numbers.
-
Disruption Opportunity
Q: How is Palantir positioned amid current disruptions?
A: Palantir thrives during times of disruption and is optimistic about the U.S. environment. The company sees opportunities in bringing meritocracy and transparency to government, with DOGE expected to expose inefficient projects and emphasize accountability. Management believes that "whatever is good for America will be good for Americans and very good for Palantir".
-
Sales Cycle Speed
Q: Are you surprised by rapid sales cycles?
A: Management is not surprised by the quick sales cycles due to the tangible energy and impact felt from customers. Palantir's solutions are delivering massive results much faster than expected, breaking down institutional barriers that previously hindered progress.
Research analysts covering Palantir Technologies.