DoD tests AI models that make it easy to switch from vendors like Palantir
On Tuesday, Raymond (NSE:RYMD) James reaffirmed a Market Perform rating on Palantir Technologies Inc . (NASDAQ:PLTR), following the company’s robust start to 2025. Palantir reported strong results and raised its guidance, which is expected to bring analysts’ estimates closer to Raymond James’ above-guidance and above-consensus model. Despite these solid fundamentals, Palantir shares dropped 9% in after-hours trading, a reaction attributed to the stock’s significant 64% year-to-date surge, outperforming the S&P 500’s 4% decline.
The company’s financial performance exceeded expectations with a 1.4% top-line beat, a remarkable 71% growth in U.S. commercial revenue, and an Adjusted EBITDA (AEBIT) beat of approximately 8.3%. Palantir’s management has raised its revenue guidance to a midpoint of $3.895 billion, compared to Wall Street’s $3.752 billion and Raymond James’ estimate of $3.832 billion. This new guidance represents a 4% increase, with AEBIT projections approximately 10% higher and a new Free Cash Flow (FCF) expectation of $1.7 billion, indicating a 115% margin. InvestingPro data reveals impressive gross profit margins of 80.25% and a strong financial health score, with 18 additional ProTips available to subscribers.
The company also showcased impressive key metrics, including $810 million of U.S. commercial Total (EPA:TTEF) Contract Value (TCV) closed, which is up 1% quarter-over-quarter and more than 180% year-over-year. U.S. commercial Remaining Deal Value (RDV) reached $2.32 billion, up 127% from the previous year, and the customer count increased by 65% year-over-year. These results reflect strong momentum in Artificial Intelligence Product (AIP) demand across various markets.
In response to these outcomes, Raymond James plans to adjust its model upwards. The firm acknowledges Palantir’s promising long-term positioning in the AI sector and perceives some value in the company as a potential safe haven in the current market landscape. However, the decision to maintain the Market Perform rating is based on the belief that Palantir’s stock needs time to consolidate its remarkable gains from the past few years and to align more closely with its valuation.
In other recent news, Palantir Technologies Inc. announced a significant 39% year-over-year increase in revenue for the first quarter of 2025, totaling $884 million. This growth was driven by a 55% surge in U.S. revenue and a remarkable 71% rise in U.S. commercial revenue. The company met its earnings per share forecast of $0.13, aligning with analyst expectations. Despite these strong results, Palantir’s stock experienced a decline in after-hours trading, reflecting investor concerns about future growth prospects.
Palantir has raised its full-year 2025 revenue guidance to a range of $3.890 billion to $3.902 billion, indicating a 36% year-over-year growth. The company’s AI Platform continues to be a key growth driver, especially in enterprise autonomy. Mizuho (NYSE:MFG) Securities recently adjusted its outlook on Palantir, raising the price target to $94 from $80 while maintaining an Underperform rating. The analysts at Mizuho acknowledge Palantir’s strong market positioning but express concerns over its high valuation multiple.
Palantir’s management emphasized the company’s focus on AI-driven innovation and expansion, projecting continued strength in U.S. commercial revenue. The company’s commitment to AI and enterprise solutions remains a strategic priority, as highlighted by CEO Alex Karp and CTO Shyam Sankar during their earnings call.
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