Palantir Technologies (NYSE: PLTR) stock surged 12.2% in Monday’s after-hours trading following the software-as-a-service (SaaS) company’s release of its second-quarter 2024 results.

Investors’ delight is attributable to the quarter’s revenue and earnings both beating Wall Street’s expectations, third-quarter revenue guidance also coming in ahead of the analyst consensus estimate, and management increasing its full-year 2024 outlook for revenue and a couple of other metrics.

Investors were also likely pleased that Palantir continues to grow its commercial business at a rapid pace. The company was originally focused on governmental agencies, so its heavy dependence on government spending made some investors uneasy.

Palantir Technologies’ key numbers

Data source: Palantir Technologies. GAAP = generally accepted accounting principles. Calculations by author except for revenue and adjusted EPS growth, which were provided by Palantir.

Investors should focus on the adjusted numbers because they exclude one-time items.

Wall Street was looking for adjusted EPS of $0.08 on revenue of $652.1 million, so Palantir beat both expectations. It also easily exceeded its own revenue guidance, which was for $649 million to $653 million.

Palantir generated cash of $144 million running its operations during the quarter, up 60% from the year-ago period. Its adjusted free cash flow was $149 million, up 55% year over year. The company ended the quarter with cash, cash equivalents, and short-term investments of $4.0 billion. It has no long-term debt.

What happened with Palantir in the quarter?

(All percentage growth figures are year over year.)

• Commercial revenue grew 33% to $307 million, accounting for 45% of total revenue.

• Government revenue grew 23% to $371 million, or 55% of total revenue.

• U.S. commercial revenue jumped 55% to $159 million.

• U.S. commercial customer count surged 83%.

• U.S. commercial remaining deal value soared 103%.

• U.S. government revenue grew 24%.

• The company closed 27 deals over $10 million.

• Customer count increased 41%.

What the CEO had to say

Here are a few key blurbs from CEO Alex Karp’s letter to shareholders:

Story continues

Guidance: Q3 outlook issued and annual outlook raised

Q3 guidance:

• Revenue of $697 million to $701 million. This equates to growth of 25% to 26% year over year.

• Adjusted income from operations of $233 million to $237 million. This equates to growth of 43% to 45% year over year.

Going into the release, Wall Street had been modeling for Q3 revenue of $679.1 million, so Palantir’s guidance sprinted by this expectation.

Annual guidance:

Data source: Palantir Technologies. YOY = year over year. *Calculations by author except for U.S. commercial revenue growth guidance, which Palantir provided.

Going into the release, Wall Street had been expecting 2024 revenue of $2.7 billion, so the company’s new guidance exceeded this estimate.

An AI stock worth considering buying or at least watching

In short, Palantir turned in a terrific quarter and guidance.

Palantir stock is worth considering buying or at least watching if you’re an investor interested in a company in the AI space that’s profitable and growing at a fast clip.

Shares are trading at 73 times projected 2024 earnings. This is a very high forward price-to-earnings (P/E) ratio, but it’s not outrageous for the stock of a company that Wall Street estimates will grow earnings 32% this year and at an average annual rate of 85% over the next five years and that generates powerful free cash flows (FCFs). FCF regularly exceeds GAAP net income.

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Palantir Stock Soars as “Unbridled Demand” for Artificial Intelligence (AI) Software Drives Strong Q2 and Annual Guidance Raise was originally published by The Motley Fool