Palantir (PLTR) stock is falling in after-hours trading even after the company raised its full-year outlook. Rishi Jallia, software equity analyst at RBC Capital Markets, joins Yahoo Finance to analyze Palantir's first quarter earnings and market reaction amid the artificial intelligence race.
Palantir's first quarter sales exceeded expectations, but U.S. commercial growth fell from 70% to 40%. Jarria blames slow U.S. commercial growth on Palantir's status as an “overhyped generative AI beneficiary,” citing mixed messages surrounding the company's artificial intelligence capabilities and skepticism about its bootcamp strategy. pointed out.
“Everyone wants to play AI games…I don't think Palantir is the cutting-edge generative AI company they claim to be,” Jaluria cautioned, adding that Microsoft (MSFT ) pointed to more established technology companies like . More powerful options.
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This post was written by Melanie Leal
video transcript
Pal Anders stock fell after hours after the company released its first-quarter results, even though the company beat the top line and further revised its full-year outlook upward. The firm now welcomes Julia Software Equity Analyst Rishi from R BC Capital Markets. It's always great to have you on the show. Now let's take a look at this Rishi. So, in PTY's report, they beat sales projections like Q One Rishi, raised their initial annual revenue projections, and now they're here at After Hours by about 9%. What's going on here, Rishi? Tell me, tell me what you think. Yes, absolutely. And Josh, thank you so much for having me. I always look forward to talking with you. Well, I think it's a combination of a few things, right? It's AAA, so it's highly anticipated. In his or my opinion, generative AI is overrated. You know, the beneficiary companies. We can get started on it right away. We saw the stock price go up 8% today heading into earnings, and then, you know, they announced earnings that lost on the price increase, which I think was factored into the stock price, and at the same time. Um, our commercials are slowing down, um, pretty, pretty big. Well, you know, last quarter we had 70% commercial growth and now we're at 40% commercial growth. I think a combination of these and several other factors are driving growth. Aftermarket stocks fell about 9%. Richie Jury is here. Why is commercial growth slowing down? Is that the only problem? Has it not been able to maintain the same pace, is there some problem with execution, or is it a market issue? Demand, what? Is that happening? Well, I think there are a few things going on, right. First, the comparison itself is a bit harsh. I think the 70% commercial number that was announced last quarter was probably just pushed up. It's a very simple comparison and also has a one-time effect. This is his first part, I think his second part. And we'll see how this plays out over the next few quarters. But when you talk to actual engineers, people who are deeply involved in AI, people who are deeply involved in ML, they know more about this topic than I could ever hope for in my lifetime. They have expressed skepticism about Palantir, especially A IP, and whether it is where it says it is. From an AI perspective, you might see a little bit of that in U.S. commercial statistics as well. And we can see why we're seeing that slowdown. What do you think, Rishi, this company is a customer acquisition boot camp. In your opinion, their AI software smart strategy has them up and running pretty fast. I think so. But, you know, I think so. I'm also a little skeptical about that boot camp strategy. I think it's his number 1. Keep in mind that Palant Tier is very heavily customized software. I estimated that over 30% of their business is professional services and outsourced data science, not actual true software. I mean, I don't even know if it's good for anything. It's like a boot camp. Still, if you really think about your bootcamp customers, these are the people who, okay, understand some of the problems I have and come to me to provide use cases, but there are Earnings calls tout it as a way to get millions of dollars in payments to customers overnight. But in reality, bootcamp customers often do multiple bootcamps or become pilots. Bringing it to market is not so much that it turns into a game changer, but I think they claim it is Rishi. So, obviously, you're not a fan and you're underperforming in that stock here. Well, today we see that coming back to reality, but you know, the market hasn't been on your side in the past. This year, there was, stock prices rebounded there. Well, there are definitely a lot of parun buyers. Do you think there's this kind of disconnect between what you're saying and the perception that Palantir is an AI winner? Actually, maybe not. Yeah, I think it comes down to the realization of what exactly Palant is, exactly what A IP is. Because there's no way Palant's stock is valued at 25 times future earnings. It is supported by 20% growth and its margins. Compared to everything else in software, we think it's impossible. At the end of the day, I think the volunteer message that they're this cutting-edge generative AI company and they're sending a lot of messages around A IP bootcamp and bootcamp is very I think they are intentionally targeting individual investors. Well, look, everyone wants to play AI games. Don't get me wrong. I'm a big believer in AI, especially Gene AI technology. I think it will change society as we know it. I don't think Palant is the company that will open up Japan as they claim. I think it's a good data pipeline. It's a good data ontology company. I'm not saying the company isn't profitable, but it's not what they claim to be. And I would say this to investors who really want to get into this AI trend with Microsoft. Well, they're doing a lot more when the AI ​​trend comes. In addition to generative AI, they have a very deep partnership with open AI. To me, Open AI is one of the most important companies in the world today. Well, I think Microsoft is a much better way to join the AI ​​wave than Pune. Palun Rich.Look, we're talking about the commercial business of AI, but of course, as you know, the roots of this company are in sales to governments. I'm just interested in that business segment. Rie, looking ahead, what do you see? And taking all the tailwinds that we see going forward? You know, I think there's a very interesting Pune and take here, right? Because we What we've found in checks and conversations is that government agencies are actually trying to reduce their dependence on Pune. And perhaps multi-sourcing and using multiple vendors. This is something that actually led to the use of a number of different vendors in place of Parun in the UK NHS contract, which ended up making the contract very large. It was smaller than expected for Palantir. So I think the result of this could actually be some disruption to government business over the next few years. Well, I would also say, you know, the government business is probably a more tenacious, higher quality business for Pal, but it's not a high growth business. And I think that's why they don't value it as much as the U.S. commercial business.