© Reuters. FILE PHOTO: 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
By Chavi Mehta
(Reuters) – Palantir Technologies (NYSE:) said it expects 2023 to be its first profitable year as the maker of data analytics software benefits from cost cuts and the artificial intelligence boom, sending its shares up 15% in trading after the bell.
The company has reduced employees’ stock-based compensation and cut back on cloud expenditure in recent months in response to lower spending from recession-wary businesses, finance chief David Glazer told Reuters on Monday.
It has also slowed hiring to cut expenses, with headcount rising just 3% sequentially in the December quarter, compared with 31% for the whole of 2022. The move underlines a trend of greater frugality by tech firms after rapid hiring during the pandemic left them with a bloated workforce.
The demand weakness, however, weighed on Palantir’s 2023 revenue forecast, which at between $2.18 billion and $2.23 billion was below the $2.29 billion estimated by analysts, according to Refinitiv.
The downturn has especially hit Palantir’s revenue from newly public firms that use its services as economic uncertainty torpedoes the market for U.S. stock listings. That revenue is expected to nearly halve in the first quarter to $16 million from a year earlier.
Still, company executives said the AI surge sparked by the rise of ChatGPT was proving to a be bright spot and would help its business in 2023, mirroring remarks from Big Tech firms.
“There are many different ways we can integrate with technologies like ChatGPT and apply those technologies to our customers data,” said Chief Revenue Officer Ryan Taylor.
The company’s revenue rose 18% to $509 million in the fourth quarter, beating analysts’ estimates for the period when it signed deals with U.S. defense contractor Lockheed Martin Corp (NYSE:) and the UK military.
Palantir, known for its work with the U.S. Central Intelligence Agency, has clinched more defense business following Russia’s war with Ukraine, selling software to visualize an army’s positions and help enterprises vet their supply chains or reduce costs.
It reported its first quarterly net income attributable to common shareholders of $30.9 million, or 1 cent per share in the October-December period, compared with a net loss of $156.2 million, or 8 cents per share, a year earlier.