Palantir Stock Soars 23% as Artificial Intelligence (AI) Demand Drives 75% Earnings Growth

Palantir Technologies (NASDAQ: PLTR) stock is skyrocketing in after-hours trading on Monday following the artificial intelligence (AI)-powered software platforms operator's release of better-than-expected fourth-quarter results and 2025 guidance. The stock is up 22.6% as of this writing at 7:34 p.m. ET.

Along with the better-than-expected Q4 revenue and earnings and 2025 guidance, there was likely another catalyst for investors sending Palantir stock soaring: In Q4, U.S. commercial revenue growth was a powerful 64% year over year. The company's early heavy dependence on government spending had concerned some investors.

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Palantir's release of its newest platform, AIP [artificial intelligence platform], in mid-2023 has revved up its financial results. And the AI revolution is still in its earliest stages, which is great news for the company and its investors.

Palantir Technologies' key numbers

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

Investors shouldn't be concerned that GAAP figures declined year over year. This was driven by the stock appreciation rights (SARs) expense, which a company incurs when employees exercise their SARs. Excluding the SARs expense, GAAP operating income, net income, and EPS are $142 million, $165 million, and $0.07, respectively.

Investors should focus on the adjusted numbers, which exclude one-time items.

Wall Street was looking for adjusted EPS of $0.11 on revenue of $781.2 million, so Palantir sprinted by both expectations, with the profit beat particularly impressive. It also exceeded its own guidance, which was for revenue between $767 million to $771 million. The company doesn't issue earnings guidance.

Palantir generated cash of $460 million from running its operations during the quarter, up 53% from the year-ago period. Its adjusted free cash flow was $517 million, up 70% year over year. The company ended the quarter with cash, cash equivalents, and short-term investments of $5.2 billion, up 44% from the year-ago period. It has no long-term debt.

What happened with Palantir in the quarter?

All percentage growth figures are year over year.

• Commercial revenue grew 31% to $372 million, accounting for 45% of total revenue.
• Government revenue grew 40% to $455 million, or 55% of total revenue.
• By region, U.S. revenue grew 52% to $558 million, accounting for 67% of total revenue. (Non-U.S. revenue accounted for the other 33% of revenue.)
• Total customer count increased 43%.
• The company closed 129 deals over $1 million, 58 deals of at least $5 million, and 32 deals of at least $10 million.
• U.S. commercial revenue jumped 64% to $214 million.
• U.S. commercial customer count surged 73%.
• U.S. commercial total contract value (TCV) deals closed jumped 134% to $803 million.
• U.S. commercial remaining deal value soared 99% to $1.79 billion.
• U.S. government revenue grew 45% to $343 million. This market began with defense and intelligence agencies but now also includes other agencies.

What the CEO had to say

Here's a snippet from CEO Alex Karp's shareholder letter:

We are still in the earliest stages, the beginning of the first act, of a revolution that will play out over years and decades. Total revenue in the fourth quarter last year reached a record $828 million, representing a growth rate of 14% from the prior quarter's total of $726 million, and 36% from the same period the year before.

This is not an incremental advance or marginal acceleration of our business. This is a new phase. ... A software juggernaut has indeed emerged. We have the products and reach of an established incumbent and the speed, growth, and agility of an insurgent start-up.

Guidance for Q1 2025 and full-year 2025

Q1 guidance:

• Revenue of $858 million to $862 million. This equates to growth of 35% to 36% year over year.
• Adjusted income from operations of $354 million to $358 million. This equates to growth of 56% to 58% year over year.

Going into the release, Wall Street had been modeling for Q1 revenue of $799.4 million, or 26% growth, so Palantir's guidance crushed 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.

This 2025 guidance is fantastic. Investors should remember it's generally standard practice for companies to issue somewhat conservative initial annual guidance because a lot can happen with the economy in nearly a year. In other words, the above outlook is probably conservative.

What will Palantir do for an encore?

Palantir's Q4 2024 results and 2025 guidance are astounding.

As I wrote in Nov. 2024, Palantir stock has what it takes to be the "next Nvidia stock" -- that is, a massive long-term winner.

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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.