The logo of U.S. software company Palantir Technologies is seen in Davos, Switzerland, May 22, 2022. Picture taken May 22, 2022. REUTERS/Arnd Wiegmann
Feb 3 (Reuters) - Shares of Palantir Technologies jumped 6.9% in early trading on Tuesday as investors bet on the company's military-grade AI tools and services after it reported a surge in quarterly sales, boosted by rising U.S. defense spending.
Denver, Colorado-based Palantir is on track to add about $24.4 billion to its market value at the current price of $158, if gains hold. The stock has risen 1,700% over the past three years.
The company, founded by tech billionaire Peter Thiel and with the CIA as one of its early backers, said on Monday that revenue derived from the U.S. government jumped 66% in the fourth quarter to $570 million, helping lift total sales to $1.41 billion, above analysts' estimate of $1.33 billion.
The data analytics firm forecast first-quarter sales above estimates and flagged a sharp surge in sales in 2026, driven in part by government contracts.
"We believe that the growing political tailwinds for reindustrialization and the strengthening of American supply chains provide a fertile backdrop for greenfield deployments of Palantir's efficiency-driving software," Morningstar analysts said.
Despite Tuesday's jump, Palantir shares are down nearly 17% so far this year, reflecting investor concerns over the company's lofty valuation. The stock trades at a forward price-to-earnings ratio of about 131.
The company will need to maintain its impressive performance to justify its current pricing, especially as future growth comparisons become more challenging, analysts at Jefferies said.
KARP MOUNTS DEFENCE OF PALANTIR SURVEILLANCE TOOLS
CEO Alex Karp defended Palantir's surveillance technology, emphasizing it has safeguards to prevent government overreach.
He said the company was "supporting in a critical manner, some of the most interesting, intricate, unusual operations that the U.S. government has been involved in", but did not specify which government programs Palantir was involved in.
Karp's remarks come as companies tied to U.S. Immigration and Customs Enforcement face growing political, public and investor scrutiny, following backlash over the agency’s aggressive tactics after two fatal shootings of U.S. citizens in January.
Some firms have moved in recent weeks to distance themselves from ICE contracts, citing reputational and governance risks, including French IT firm Capgemini, which said this week it would sell its U.S. government services unit after facing political, investor and worker backlash over an ICE surveillance contract.
Last year, Palantir landed a contract with ICE to develop surveillance software for immigration enforcement, which as of June 3, was its largest single award from the agency among 46 federal contract actions since 2011.
(Reporting by Kanishka Ajmera and Rashika Singh in Bengaluru; Editing by Mrigank Dhaniwala and Pooja Desai)
