Palantir Technologies(PLTR) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue growth accelerated to 27% YoY, exceeding prior guidance by 5%, driven by strong US commercial and government businesses [17] - Q2 revenue reached $678 million, up 27% YoY and 7% sequentially [18] - Adjusted operating margin expanded to 37%, marking the seventh consecutive quarter of margin expansion [17] - GAAP net income hit a record $134 million, with GAAP operating income at $105 million, representing a 16% margin [25] - Rule of 40 score increased by 7 points sequentially to 64, driven by revenue growth and profitability [18] - Total remaining deal value grew 26% YoY to $4.3 billion, with remaining performance obligations up 41% YoY to $1.4 billion [23] Business Line Performance - US commercial revenue grew 55% YoY and 6% sequentially to $159 million, with AIP driving both new customer conversions and expansions [19] - US commercial TCV bookings grew 152% YoY to $262 million, with customer count up 83% YoY to 295 customers [20] - International commercial revenue grew 15% YoY to $148 million, though it declined 1% sequentially due to headwinds in Europe [20] - Government revenue grew 23% YoY and 11% sequentially to $371 million, with US government revenue up 24% YoY to $278 million [21] - International government revenue grew 21% YoY and 18% sequentially to $93 million, driven by funding related to Eastern Europe efforts [22] Market Performance - US commercial business saw unprecedented demand, with AIP driving 70% YoY growth in revenue excluding strategic contracts [19] - US government business accelerated for two consecutive quarters, growing more than 8% sequentially each quarter [9] - Strategic commercial contracts declined to $9 million in Q2, with expectations of further decline to $6-8 million in Q3 [20] Strategy and Industry Competition - The company is focused on deploying enterprise AI in production, solving meaningful problems for customers, and moving from prototype to production [6] - Palantir's differentiation lies in its ability to transition AI from prototyping to production, a bottleneck in the market [33] - The company is leveraging bootcamps and pilots to move towards high-value production use cases, while building deep production-level relationships with customers [9] - Palantir is launching Warp Speed, a new offering to power American reindustrialization, addressing the failure of legacy software playbooks in manufacturing [15] Management Commentary on Operating Environment and Future Outlook - Management highlighted the unprecedented enterprise AI opportunity, with the AI ecosystem's infrastructure build-out expected to grow from $200 billion to $600 billion annually [6] - The company is bullish on its ability to lead customers across the bridge from prototype to production, with expanding product capabilities [10] - Palantir is investing in hard technical problems to debottleneck the journey from prototype to production, while calibrating expense growth below revenue growth [24] - The company raised its full-year revenue guidance to $2.746 billion, representing 23% YoY growth, and expects continued GAAP profitability and operating income [27] Other Important Information - Palantir signed 27 deals worth $10 million or more in Q2, closing nearly $1 billion in TCV [7] - Notable customer expansions include Tampa General, Panasonic Energy, AARP, Eaton, and Kinder Morgan, all leveraging AIP for production use cases [8] - The company received a $153 million contract from the Department of Defense's CDAO, with potential awards up to $480 million over five years [9] - Palantir repurchased 1.2 million shares in Q2, with $973 million remaining under its share repurchase authorization [26] Q&A Summary Question: What is Palantir doing to differentiate from AI competitors? - Palantir's differentiation lies in its ability to transition AI from prototyping to production, built on over a decade of deep technical investments [33] Question: How does Foundry change with LLMs? - Foundry acts as an operating system for the modern enterprise, organizing and orchestrating the interaction of physical business with technology, AI, and LLMs [34] Question: Are Bootcamp conversions accelerating? - Bootcamps are exposing customers to new opportunities, but the focus remains on deploying enterprise production AI at scale, as evidenced by the 27 deals worth $10 million or more closed in Q2 [37] Question: What is Warp Speed, and what are the barriers to US reindustrialization? - Warp Speed is an operating system for modern American manufacturers, reimagining production by integrating legacy systems and addressing the failure of traditional software playbooks [42] - The biggest barrier for US primes is the legacy software playbook, which new manufacturers recognize as ineffective, driving demand for solutions like Warp Speed [43]