What happened
Palantir (PLTR -4.62%) stock trounced the market this week. Shares soared 32% through early Friday trading compared to a 0.1% drop in the S&P 500, according to data provided by S&P Global Market Intelligence. That spike pushed the software solutions provider's stock up 50% so far in 2023 compared to an 8% increase in the wider market.
The sharp move higher was sparked by the company's Q1 earnings report, which showed continued progress in moving the business toward sustainable profitability.
So what
Palantir announced on Monday that sales increased 15% in the selling period that ran through late March. That result beat management's forecast and pushed revenue up to $525 million. Executives said this growth represents just a small portion of the long-term potential for the company as artificial intelligence (AI) unlocks new value in the enterprise software business. "The depth of engagement with and demand for our new AI platform is without precedent," CEO Alex Karp said in a letter to shareholders.
Investors were also happy to see Palantir book its second consecutive quarter of positive net income. To be sure, its operating margin was tiny. But executives are optimistic about continued positive earnings throughout 2023 after the company notched its first profitable quarter in late 2022.
Now what
Palantir's core market, the U.S., is growing at a nearly 30% annual rate today, which suggests the company could reaccelerate its overall sales gains. Demand for AI software solutions appears to be lifting its business with respect to both sales and profitability.
Palantir still has a lot of work ahead of it to build its scale and push profit margins into solidly positive territory. But the Q1 earnings update shows clear progress toward these goals, and Wall Street responded by pushing the growth stock higher.
