Palantir Reports Meager Corporate Growth, Lackluster Forecast

(Bloomberg) -- Palantir Technologies Inc., struggling to sell its data software to companies, forecast annual sales growth of at least 30%. That suggests a significant slowdown from last year.

By comparison, sales growth in 2020 was 47%, reaching $1.1 billion and exceeding an average of analysts’ estimates compiled by Bloomberg. “The trajectory of growth in 2021 implies a significant deceleration,” Citi wrote in a note to clients.

Work with government agencies continues to dominate for the Denver-based company. Corporate revenue increased 4% in the fourth quarter, while government sales jumped 85%, the company said in a statement Tuesday. Shares were down about 9% during morning trading in New York.

Investors expressed worry about whether the performance would convince longtime shareholders to stick around when a lockup on the sale of stock lifts later this week. Peter Thiel co-founded the company with Chief Executive Officer Alex Karp in 2003, and some stockholders have been waiting a long time to sell on the open market. Four-fifths of all shares will be eligible to trade for the first time later this week, which could result in high volatility.

Government demand for Palantir software has surged during the coronavirus pandemic. More than a dozen government agencies use it to anticipate Covid-19 hotspots, allocate protective equipment and distribute vaccines. At the same time, calls to curb use of the software have intensified, citing invasions of privacy and the potential for misuse.

In the past, Palantir operated more like a consulting firm sending staff to customers’ offices and helping them set up and use the software. Companies didn’t like this arrangement as much as government officials did, and they didn’t like the cost -- nor did many investors.

The company began overhauling its systems in 2017, automating the setup process and more recently giving customers the choice to only purchase the parts of the software they want. These changes decreased costs and paved the way for Palantir to strike deals with Airbus SE and BP Plc and to sign partnerships with Fujitsu Ltd. and International Business Machines Corp.

But businesses still aren’t embracing Palantir in the way governments have. In the period that ended in December, Palantir signed a contract with the U.S. Food and Drug Administration to help power drug reviews and inspections and expanded deals with the U.S. Army and the U.K. National Health Service.

Karp struck an upbeat tone in a prerecorded videos for investors, featuring him in a blue ski parka walking through a snowy forest. He condemned “near-term myopism” and said, “At Palantir, we’ve rejected this in every way.”

“Palantir’s numbers are a lagging indicator of several macro trends that we got right,” Karp said. “Software is the language of our time, and mastery of software will determine what works and what doesn’t. The numbers that you’ve seen are a reflection of our bet that this would happen.”

For the year, Palantir posted a first-ever adjusted operating profit, ending nearly two decades of sustained losses at the company. Annual operating income in 2020, excluding stock-based compensation and other items, was $190 million. It continues to lose money when accounting for those expenses.

Despite the more conservative forecast for the year, Palantir expects to maintain momentum in the first quarter. It issued a sales growth forecast for the period of 45%. The company said it will exceed $4 billion in annual revenue by 2025.

(Updates with forecast starting in the first paragraph.)

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