Palantir Posts Another Loss, Leaves Investors Waiting for Profit

Lizette Chapman

(Bloomberg) -- Palantir Technologies Inc. racked up more operating losses in the fourth quarter, failing to meet expectations that the data software company would finally break even.

The Denver-based company reported an adjusted operating loss of $156.6 million in the period that ended in December. Analysts on average expected an operating profit of $48.1 million, according to data compiled by Bloomberg. The shares were down about 8% in the first minutes of trading Tuesday.

For the year, Palantir posted a first-ever operating profit, ending nearly two decades of sustained losses at the company. Annual adjusted operating income in 2020 was $190 million on revenue of $1.1 billion, the company said in a statement Tuesday. Each number exceeded analysts’ expectations. Palantir also issued a first-quarter sales growth forecast of 45%.

Investors expressed worry about whether the performance would be enough to keep longtime shareholders 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.

Global 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.

The work with government agencies continues to dominate. Corporate revenue increased 4% in the fourth quarter, while government sales jumped 85%. 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.

“Palantir’s numbers are a lagging indicator of several macro trends that we got right,” Karp said in a prerecorded video for investors, featuring him in a blue ski parka walking through a snowy forest. “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.”

(Updates shares in the second paragraph.)

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