FILE PHOTO: Signage for Palantir is seen during the Association of the United States Army annual meeting and exposition at the Walter E. Washington Convention Center in Washington, U.S., October 14, 2024. REUTERS/Nathan Howard/File Photo
(Reuters) -Palantir shares jumped more than 14% before the bell on Tuesday, after the data analytics firm raised its annual revenue forecast for the third time, bolstering investor confidence that the AI frenzy was fueling demand for its services.
The company is among the biggest winners of the generative artificial intelligence boom, with its stock price more than doubling in value this year — a rally that has sparked concerns over its steep valuation.
But Palantir's third-quarter results on Monday allayed some of those fears, thanks to strong demand for its AI platform, which is used to test, debug code and evaluate AI-related scenarios. It also provides software to governments that visualizes army positions.
"Countless businesses now want to analyze data so they can make faster and more informed decisions; AI is at the heart of this work and Palantir is an expert in data analysis," said Dan Coatsworth, investment analyst at AJ Bell.
Palantir raised its 2024 revenue forecast to between $2.805 billion and $2.809 billion, from its previous range of $2.742 billion to $2.750 billion.
For the third quarter, the company saw its revenue from U.S. government contracts surge 40%, which made up more than 44% of its total sales of $725.5 million.
Palantir's commercial revenue jumped 54%, reflecting its attempt to expand customer base in the private sector and reduce dependence on government work.
The growth demonstrates that the commercial sector has proven to be a "fruitful opportunity", Coatsworth said.
Morningstar analysts, however, cautioned that the stock's recent surge in value means that "any bump in the road, such as sales execution challenges or weaker-than-expected top-line growth or guidance, could materially affect the stock's valuation".
If premarket gains hold through the day, Palantir is expected to add $13.8 billion to its market value.
It trades at a forward price-to-earnings ratio of 95.43, compared with peer Oracle's 25.60 and Snowflake's 126.92.
(Reporting by Zaheer Kachwala in Bengaluru; Editing by Shilpi Majumdar)
