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Palantir Stock Analysis: Should You Buy PLTR After Q1 Earnings Results?

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Palantir (NYSE:PLTR) stock has been a subject of fascination and debate for retail and institutional investors. Known for its AI driven software solutions, the company has long been associated with serving government agencies.

However, that is changing as their first quarter results further signal strength in commercial revenues. This shift, coupled with significant margin expansion, provides a clear trajectory toward substantial operating income and FCF growth in 2024.

Commercial Growth Engine Continues to Roar

Palantir’s Q1 FY24 earnings results showcase the remarkable strides it has made in its commercial segment. The company has successfully demonstrated the value of its software platforms across industries like health care, manufacturing, and energy. 

Commercial revenue growth has significantly outpaced the already impressive growth of its government segment. In the first quarter commercial revenue increased 27% YOY, compared to government revenue increasing 16% YOY. 

Customer count grew 42% YOY and 11% quarter over quarter. Their AIP platform continues to gain traction, further showcasing the power of the company’s AI capabilities. 

The growth of the commercial segment is crucial to their long-term success. Commercial clients have recurring revenue models and higher growth potential, offering Palantir both stability and a path to accelerated expansion.

Operating Income and FCF Set to Take Off

Palantir stock has historically prioritized reinvesting profits back into the business to fuel growth. However, the 2023 fiscal year points to a significant inflection point of their first year of GAAP profitability. 

This important milestone has carried over into 2024, with Palantir achieving their 6th consecutive quarter of profitability. The company is now well positioned to generate robust operating income and FCF.

In the first quarter of 2024, Palantir’s operating income swelled to $80.8 million. Adjusted FCF hit $149 million, as management’s focuses further on operational efficiency. 

Business is booming, and management raised their commercial revenue and operating income guidance. They expected to generate adjusted FCF between $800 — $1 billion in FY24.

Palantir Stock: Strong Liquidity and Guidance for 2024

Palantir stock has been largely misunderstood on Wall Street, and their flip toward profitability in an extremely positive sign for the future. Their commercial revenue continues to outpace government revenue in 2024. 

Additionally, their operating income and FCF is expected to rise substantially in the 2024 fiscal year. With $3.87 billion in cash on hand and zero long term debt, Palantir remains well positioned to capitalize on the rapidly growing AI software market.

On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Terel Miles is a contributing writer at InvestorPlace.com, with more than seven years of experience investing in the financial markets.

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