Palantir Q3 Earnings Preview: Can the software maker justify its valuation?

Palantir Technologies (NYSE:PLTR) is scheduled to announce its third quarter earnings results on Monday, November 4th, after market close.

The software firm generated adjusted EPS of $0.09 in the second quarter on revenue of $678.13M that grew +27.2% Y/Y. For the third quarter, it forecasts revenue in the range of $697M – $701M and adjusted income from operations of $233M – $237M.

What analysts expect?

RBC Capital Markets continues to see Palantir’s (PLTR) valuation as “unsustainable” absent a substantial beat in Q3 and outlook raise.

Revenue from government sources is set to show improvement in line with the management’s outlook, but commercial momentum appears unsustainable “given high levels of competition and product-market fit outside large non-technical enterprises.”

Mizuho echoed similar thoughts, noting: “Despite Palantir (PLTR) showing good recent execution, we remain concerned by the lack of visibility into its business, and we find the current valuation indefensible.”

However, Seeking Alpha contributor Michael Del Monte sees the company positioned for significant growth across its government and commercial customers, with contracts expanding and being extended with AIP.

Another analysis by Stephen Ayers struck a more cautious stance, expecting free cash flow margins to remain solid and capex to stay low, but its valuation will require sustained 30%+ revenue growth to justify.

The consensus estimate for the current quarter is an EPS of $0.09 (+28.6% Y/Y) and revenue of $703.69M (+26.1% Y/Y).

Over the last 2 years, PLTR has beaten EPS estimates 75% of the time and has beaten revenue estimates 88% of the time.

Over the last 3 months, EPS estimates have seen 11 upward revisions and 0 downward. Revenue estimates have seen 10 upward revisions and 1 downward.