Latest / Bloomberg Intelligence / Palantir Jumps After Reporting Record Quarterly Sales Growth

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Palantir Jumps After Reporting Record Quarterly Sales Growth · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 1: us live on YouTube.
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  Speaker 2: There's been a ton of earnings out. It's hard to
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  Speaker 2: keep up with all of it. But one that has
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  Speaker 2: been the talk of everywhere is Palied here right, And
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  Speaker 2: one person who has been running around Bloomberg like crazy
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  Speaker 2: is Man Deep saying he's Bloomberg Intelligence senior tech industry analysts.
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  Speaker 2: Thanks for coming out, Man Deep, right in the studio.
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  Speaker 2: The Stack price sarch more than five hundred percent over
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  Speaker 2: the past year. I mean, this company is incredible. Is
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  Speaker 2: it what the company CEO calls a dominant software company
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  Speaker 2: of the future? Would would you say?
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  Speaker 3: I mean, clearly there is a lot baked into the valuation,
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  Speaker 3: but I want to focus on, you know, the net
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  Speaker 3: new R, which is a metric that software companies are
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  Speaker 3: measured on.
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  Speaker 4: And when you compare Palenteers.
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  Speaker 3: Commercial segment revenue, which everyone is excited about, their total
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  Speaker 3: deal value that's remaining is around two point eight billion.
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  Speaker 3: The new ar are increased by five hundred million. Contrast
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  Speaker 3: that with a Microsoft or a Google Cloud. Microsoft added
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  Speaker 3: almost nine billion in net new ARR this quarter, and
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  Speaker 3: they talked about you know, AI being used across one
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  Speaker 3: hundred million Microsoft Copilot users twenty million GitHub Copilot users.
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  Speaker 3: So from that perspective, you know, balenteers increase in remaining
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  Speaker 3: deal value of five hundred million looks pretty small.
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  Speaker 4: I mean, Palenteers overall revenue rund rate is four billion.
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  Speaker 3: Microsoft clearly is you know, a company that's almost one
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  Speaker 3: hundred times or eighty times more bigger than Palenteer.
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  Speaker 4: But it just goes to show that even on a
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  Speaker 4: net new AIRR.
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  Speaker 3: Basis, Microsoft is adding more revenue per quarter than a
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  Speaker 3: Palenteer is. And still people are very excited about Palenteer's product,
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  Speaker 3: you know, prospects, and to my mind, clearly, you know
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  Speaker 3: they have a product that is appealing to a certain
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  Speaker 3: section of enterprise users. But at this valuation, I mean,
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  Speaker 3: they can't sustain that for the next thirty forty quarters,
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  Speaker 3: which is what they need to show to grow into
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  Speaker 3: the valuation. And I just don't see from a product
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  Speaker 3: perspective they'll have the same kind of appeal as a
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  Speaker 3: Microsoft Copilot or a Google Cloud or you know, any
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  Speaker 3: of these large companies.
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  Speaker 5: Some question today, how do you guys value this thing?
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  Speaker 5: I mean I got it at like two three hundred
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  Speaker 5: times earning. So that's not the way to go.
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  Speaker 3: So we've seen that with you know, new IPOs. When
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  Speaker 3: they come to the market, they get a premium multiple.
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  Speaker 3: They get traded at you know, thirty forty time sales.
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  Speaker 3: Snowflake which is a competitor to Palenteer, when it went public,
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  Speaker 3: it traded at sixty seventy time sales. Look at where
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  Speaker 3: the stock is now. It's flat since the IPO. Even
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  Speaker 3: though the company has grown top line at thirty thirty
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  Speaker 3: five percent Kegger, the stock is flat. So that's what
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  Speaker 3: I mean by growing into the valuation, because there is
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  Speaker 3: so much embedded in that upfront multiple that even growing
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  Speaker 3: at thirty percent is not enough. Palenteer really needs to
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  Speaker 3: grow at fifty percent to be able to show any
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  Speaker 3: sort of stock return from.
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  Speaker 4: This point on. Can it do that?
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  Speaker 2: No?
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  Speaker 4: I mean that's why I said I compare the product.
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  Speaker 3: My initial comments were around comparing Palenteer's product versus other
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  Speaker 3: large enterprise software makers, and even you know, you go
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  Speaker 3: down the list, Salesforce service, now Adobe like, these are
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  Speaker 3: much bigger companies and they have come I hounded at
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  Speaker 3: twenty percent Keger over the years because they had a
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  Speaker 3: seat base or a consumption based model. We don't even
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  Speaker 3: know what kind of a business model Talenteer has. Yes,
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  Speaker 3: it's winning government deals, Yes it's winning some enterprise deals.
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  Speaker 3: But we don't know how they account for that revenue
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  Speaker 3: every quarter. Is it a seat based model, is a
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  Speaker 3: consumption base? We don't have that kind of visibility to
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  Speaker 3: their business model.
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  Speaker 4: All right, make it this red headline out of the way.
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  Speaker 4: White House fires.
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  Speaker 5: Most of Puerto Rico's oversight board members not really sure
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  Speaker 5: what that is, but we're going to have more reporting
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  Speaker 5: on that coming up. I want to get that headline
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  Speaker 5: out there. So in a conter party, I can tell
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  Speaker 5: you the Google story, I can tell you that Microsoft story.
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  Speaker 5: I have no idea what the Palenteer story is. Can
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  Speaker 5: you explain it to me like I'm a five year old?
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  Speaker 3: Yeah, So their software out of the box will help
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  Speaker 3: you make sense of your big data strategy. They really
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  Speaker 3: curved out a name for themselves. Big data became the
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  Speaker 3: thing when a company had a large amount of data,
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  Speaker 3: whether it's log data or some other type of reporting data.
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  Speaker 3: They would help you make sense of it because they
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  Speaker 3: have something proprietary that no one else has in terms
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  Speaker 3: of organizing that data and making it usable.
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  Speaker 4: So that's their value proposition.
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  Speaker 3: But with the AI wave and llms, they were able
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  Speaker 3: to integrate LLM calls within their offering to develop a
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  Speaker 3: customer service or a supply chain use case that you
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  Speaker 3: can apply AI on top of their ontology, which is
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  Speaker 3: their core product, and a lot of other companies are
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  Speaker 3: doing the same. To my mind, Microsoft is doing the
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  Speaker 3: same for their customers. They're trying to embed open AI
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  Speaker 3: with their core offerings, with their CRM system and help
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  Speaker 3: them deploy a customer service use case. So the differentiation
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  Speaker 3: of Balanteer versus Microsoft, to my mind is not that
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  Speaker 3: big as the valuation reflects. And that's where I'm They're
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  Speaker 3: not going to grow fifty percent for the next twelve
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  Speaker 3: to twenty quarters, which is what the valuation is implying.
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  Speaker 2: Now, how would you compare what they do as far
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  Speaker 2: as a government contractor versus the commercial side, like which
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  Speaker 2: is doing better for them?
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  Speaker 3: Yeah, so they have a much higher exposure to government side.
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  Speaker 3: I mean government side is still more than fifty percent
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  Speaker 3: of their revenue. And all these large enterprise software companies
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  Speaker 3: they have ten to fifteen percent government exposure. So Paleteer's
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  Speaker 3: government exposure is way too large compared to other software makers.
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  Speaker 3: And on top of that, their international sales seem to
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  Speaker 3: be declining at least, you know, on the commercial side,
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  Speaker 3: because of the polarizing views of the management.
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  Speaker 4: So if they.
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  Speaker 3: Were more balanced, probably they would win more international business.
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  Speaker 3: But right now this is a US centric story, and
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  Speaker 3: that's where I think it sort of puts a dent
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  Speaker 3: to the growth rate down the line once they run
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  Speaker 3: out of the deals that they currently you have signed.
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  Speaker 5: What's the next thing we need to pay attention to.
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  Speaker 5: Is there anything earnings wise coming up this week?
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  Speaker 4: You guys AMD tonight?
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  Speaker 3: Clearly a lot of that Capex if it is flowing
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  Speaker 3: to AMD, should show up tonight. And our view is
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  Speaker 3: clearly the market is shifting from training to infrincing when
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  Speaker 3: it comes to Capex, and AMD could be one of
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  Speaker 3: the beneficiaries of that infrincing Capex.
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  Speaker 5: AMD is the ticker. It's got a market cap of
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  Speaker 5: two hundred and eighty billion dollars. The stock is up
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  Speaker 5: forty two percent year to date. So another one of
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  Speaker 5: men deep stocks is up like huge. I mean, this
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  Speaker 5: kid was born on third base. Thought he had a
• 7:38
  Speaker 5: triple Dude. Everything you touched just be goes, just rips
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  Speaker 5: to the sky. It's unbelievable. Man Deep Sing, He's one
• 7:45
  Speaker 5: of the good ones, folks. Senior tech industranals for Bloomberg Intelligence.
• 7:48
  Speaker 5: In fact, that ian on Agran and they manage our
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  Speaker 5: whole tech coverage area. And it is a global business
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  Speaker 5: and we we have analysts in Europe, Asia and North America.
• 7:56
  Speaker 4: And that's how we do that.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 8:14
  Speaker 2: We're nearing kind of like the Friday mark where the
• 8:16
  Speaker 2: tgif right, Molsen Core's happy hour, let's go for it.
• 8:21
  Speaker 2: They had their earnings come out, so we want to
• 8:22
  Speaker 2: do is break it all down for you. Kennon say,
• 8:24
  Speaker 2: Bloomberg Intelligence senior consumer product analysts, thanks for coming right
• 8:28
  Speaker 2: here in the studio. Rising costs tied to aluminum tariffs.
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  Speaker 2: This was a big point for them. How much of
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  Speaker 2: an impact is that having on the company?
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  Speaker 6: Yeah, Hi, Lisa, it's material. You know, they describe it
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  Speaker 6: as an indirect cost, but it really spiked up there
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  Speaker 6: in the quarter, you know, encroaching on their margin.
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  Speaker 4: I think though.
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  Speaker 6: The bigger picture though here is the continued week sales,
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  Speaker 6: the lackluster sales are seeing in the US beer market
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  Speaker 6: and alcoholic beverages in general. You know, this is their
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  Speaker 6: peak summer selling season. This is and you know, these
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  Speaker 6: companies should be thriving, and it looks like the summer
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  Speaker 6: selling season in the US for alcoholic beverages is going
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  Speaker 6: to be a dud. It's a cautious consumer, it's a
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  Speaker 6: particular pressures on the Hispanic demographic. It's it was a
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  Speaker 6: lousy June in terms of the weather and key markets,
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  Speaker 6: and basically all the big brewers are setting up for
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  Speaker 6: a tough second half. As you know, if these trends continue,
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  Speaker 6: you know, I expect continued sluggish performance in the second
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  Speaker 6: half as well.
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  Speaker 5: So is this beer thing? Is it the kind of
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  Speaker 5: a global thing? I mean, I know, you guys at
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  Speaker 5: Bloomberg Intelligence, you get the data that choose consumption of
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  Speaker 5: everything out there.
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  Speaker 6: In the case of most in course, Paul, Yeah, they
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  Speaker 6: have a big operation in Europe, Eastern Europe, many parts
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  Speaker 6: of Western Europe, and that that had they had lower
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  Speaker 6: volumes as well. It was saved by higher prices to
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  Speaker 6: a degree. But you know, again, the big picture is
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  Speaker 6: that consumers are just not going out to the bars
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  Speaker 6: as much. On premise sales, we're particularly weak. That could
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  Speaker 6: be weather related, I mean, it's just another example, but
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  Speaker 6: also I think it could be, you know, the culmination
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  Speaker 6: of a lot of price increases over the last few years.
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  Speaker 6: Maybe we've hit a point where there's some sticker shot
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  Speaker 6: going on here.
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  Speaker 2: And what about people drinking You said not going to
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  Speaker 2: the bar, but what about just drinking less alcohol in general.
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  Speaker 6: Well, that's a great point least, I think. Longer term,
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  Speaker 6: you have some secular headwinds as well. Things you've talked
• 10:29
  Speaker 6: about in the past. You know, the spread of legal cannabis,
• 10:32
  Speaker 6: particularly here in the US. In the US, you also
• 10:35
  Speaker 6: have these intoxicating hemp drinks which are all the rage
• 10:38
  Speaker 6: now in many markets. You have the GLP one users
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  Speaker 6: are cutting back. Gen Z doesn't seem to embrace alcohol
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  Speaker 6: as much as their parents did. All those things are
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  Speaker 6: weighing on it longer term, but that combined with some
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  Speaker 6: near term pressures, is really weighing on these you know,
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  Speaker 6: these companies.
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  Speaker 5: It's a disappointing discussion here. I mean, not that we're
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  Speaker 5: gonna have fun here. I'll tell you here's the problem
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  Speaker 5: with all this White.
• 11:02
  Speaker 4: Claw and sea Breeze and I don't know what.
• 11:04
  Speaker 5: You know, the iced tea in vodka, what's that all about?
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  Speaker 2: Is that a fad?
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  Speaker 6: It seems to have some legs there, you know, the
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  Speaker 6: pre mixed cocktails. Let me put it this way. Some
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  Speaker 6: of the things that did well in the quarter are
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  Speaker 6: things like bush light apple. You know, some flavor, some
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  Speaker 6: flavor out there is coming back apple. You know. Some
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  Speaker 6: of the hard teas are doing well. The pre mixes
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  Speaker 6: continue to do well. So I think the way you
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  Speaker 6: could take away is maybe the consumer, while you know, economizing,
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  Speaker 6: is also looking for a flavor and different variety and so.
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  Speaker 6: And also the non alcoholic and low alcoholic segment continues
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  Speaker 6: to do well from a low base. So I think
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  Speaker 6: in the second half I would expect a higher level
• 11:49
  Speaker 6: of promotion and innovation along those themes low alcohol and
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  Speaker 6: no alcohol flavor innovation that's going to be really popular,
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  Speaker 6: I think in the second half the spur volume.
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  Speaker 2: Hey, before you go, can you break down some of
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  Speaker 2: those macro economic headwinds that the company's facing.
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  Speaker 6: Sure, well, the primary one is just you know, consumer confidence.
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  Speaker 6: Consumers just feel you know, they're reading the papers all
• 12:15
  Speaker 6: these you know, tier fund certainties, and you know the
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  Speaker 6: pressure on the Hispanics in particular, what's going on there.
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  Speaker 6: Those are the big things, you know, And I don't
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  Speaker 6: think it's anything major, but it's it's just enough on
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  Speaker 6: the margin that these are these are purchases that can
• 12:30
  Speaker 6: be deferred. H and consumers buy and large are.
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  Speaker 5: All right, It's not It wasn't very Funkenshey, senior consumer
• 12:37
  Speaker 5: products analyst, Bloomberg Intelligence, joining us from a print in.
• 12:43
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 12:57
  Speaker 2: Tariffs having a bigger impact on Caterpillar margins shares all over,
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  Speaker 2: they're down about two tens of percent. So here to
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  Speaker 2: break down. It's earnings ward Christopher Jillino, Bloomberg Intelligence Senior
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  Speaker 2: US machinery analyst, Christopher, thanks for joining us this morning.
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  Speaker 2: All that said, the CEO, Joe Creed, the new CEOs,
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  Speaker 2: said the company is going to be able to offset
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  Speaker 2: the impact of tariffs. Did he get into how they're
• 13:17
  Speaker 2: going to do that.
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  Speaker 7: Yeah, The focus initially now was really going to be
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  Speaker 7: on the cost side of the equation and really some
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  Speaker 7: you know, internal initiatives and productivity to help mitigate the tariffs.
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  Speaker 7: They are going to have to raise prices eventually, but
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  Speaker 7: you know, I think that's probably more of a twenty
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  Speaker 7: sixth story right now. They're doing their best to kind of,
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  Speaker 7: you know, mitigate this internally.
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  Speaker 5: So talk to us about underlying demand out there for
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  Speaker 5: Caterpillar tractors. What's the company saying?
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  Speaker 7: Yeah, So I think this is really the big takeaway
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  Speaker 7: from the quarter. You know, the print was a little weak,
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  Speaker 7: it came in a little below expectations, But I think
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  Speaker 7: the big takeaway here is that underlying demand is still
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  Speaker 7: pretty darn reszils. You had backlog ubsequentially again this quarter,
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  Speaker 7: which set another record. You had improving order trends across
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  Speaker 7: all three of their main businesses. Dealer inventories still remain
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  Speaker 7: quite low, and the company actually raised their sales guidance
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  Speaker 7: for the year. So you know, that seems to suggest
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  Speaker 7: us that underlying demand is still intact despite all these
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  Speaker 7: these tariff headwinds.
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  Speaker 2: And now, how did their results kind of match up
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  Speaker 2: to some of their their peers if they believe there's
• 14:26
  Speaker 2: Terrex Lindsay who already opened their books, how did the
• 14:29
  Speaker 2: how does Caterpillar match up?
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  Speaker 7: Yeah, I characterized the overall earning season for for US
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  Speaker 7: machinery is kind of mixed. If you think about really
• 14:38
  Speaker 7: construction peers, which which is kind of more Caterpillars sweet spot.
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  Speaker 7: That's a market that's you know, kind of bouncing along
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  Speaker 7: the bottom. Here. We do have you know, infrastructure projects
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  Speaker 7: and these large megat projects which are helping to offset
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  Speaker 7: some of the weakness that you're seeing on the private,
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  Speaker 7: non residential side, things that are more interest rates inive.
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  Speaker 7: But you know, you're starting to see some positive indicators
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  Speaker 7: that would you know, lead us to believe that you're
• 15:05
  Speaker 7: going to start to see a cyclicl of recovery emerge
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  Speaker 7: in twenty twenty six. There's a number of you know,
• 15:10
  Speaker 7: leading indicators out there that would support that, And I
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  Speaker 7: think really Caterpillars results here with orders being up in
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  Speaker 7: the construction business, with the backlog being up, really kind
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  Speaker 7: of reinforced that view.
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  Speaker 5: Where does Caterpillar make their big trucks and stuff like
• 15:26
  Speaker 5: that everywhere?
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  Speaker 1: Right?
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  Speaker 7: They're they're a global company. They've got a large footprint
• 15:33
  Speaker 7: that spans you know, every continent in you know, most countries.
• 15:38
  Speaker 4: But if you think.
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  Speaker 7: About it, at the end of the day, it's North America, right,
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  Speaker 7: It's more than half of their revenues. Europe is called it,
• 15:44
  Speaker 7: you know, twenty percent, ish Asia Pacific a little bit
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  Speaker 7: below that, and then you know Latin America is kind
• 15:50
  Speaker 7: of closer to ten percent. They are a net exporter
• 15:53
  Speaker 7: out of the US. But as we saw today, you know,
• 15:56
  Speaker 7: Tariff's probably going to be a little bit more of
• 15:58
  Speaker 7: ahead wind they than they had an initially anticipated. They're
• 16:02
  Speaker 7: looking for, you know, somewhere between a one point three
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  Speaker 7: to a one point five billion dollar hit for this year.
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  Speaker 2: So, Chris, you kind of touched upon this. Sales slipped
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  Speaker 2: in construction resource industries, but energy and transportation unit that
• 16:14
  Speaker 2: had some higher sales. What is that that driving force
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  Speaker 2: behind the growth in engines and transportation.
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  Speaker 7: So this continues to be one of really the big
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  Speaker 7: highlights for Caterpillar, you know, despite some of the cyclical
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  Speaker 7: softness that they're seeing, is the energy and transportation business,
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  Speaker 7: particularly in power generation. So think you know, data centers
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  Speaker 7: that are becoming an increasingly big larger part of the portfolio.
• 16:40
  Speaker 7: Power gen continues to drive outsize growth within the energy
• 16:43
  Speaker 7: and transportation business. There's you know, a multi year backlog there,
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  Speaker 7: so we have, you know, veryly tremendous visibility. And what
• 16:51
  Speaker 7: Caterpillar is doing now is really expanding capacity to help,
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  Speaker 7: you know, meet this growing demand for data centers and
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  Speaker 7: power generation. So there's a long secular tailwind at play
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  Speaker 7: here and really, you know, we think we have a
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  Speaker 7: pretty good visibility here over the back half of the decade.
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  Speaker 5: So is Caterpillar and companies like Caterpillar, are they benefiting
• 17:13
  Speaker 5: or do you expect them to benefit from maybe on
• 17:16
  Speaker 5: shoring even more manufacturing in this country if to the
• 17:20
  Speaker 5: extend that President Trump you know, wants to do that
• 17:22
  Speaker 5: and he's been talking about that a lot. Is that
• 17:24
  Speaker 5: something where kat would will see it?
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  Speaker 7: Yeah, I mean I would say we haven't really heard
• 17:32
  Speaker 7: of you know, I would say concrete or tangible evidence
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  Speaker 7: of that happening yet, and it's really difficult to you know,
• 17:40
  Speaker 7: get a lens on that on a quarter to quarter
• 17:42
  Speaker 7: I think, you know, if we look back, maybe over
• 17:45
  Speaker 7: a five year window, maybe we'll have a better picture
• 17:47
  Speaker 7: of that. But yet, no doubt, Caterpillar is a big
• 17:49
  Speaker 7: beneficiary of any kind of construction activity here domestically. And
• 17:55
  Speaker 7: then not only on top of you know, not only
• 17:57
  Speaker 7: just moving the dirt and building the the facilities, they
• 18:02
  Speaker 7: are also, like I mentioned, having a have a bigger
• 18:05
  Speaker 7: piece of the data center and power generation needs within
• 18:09
  Speaker 7: our within our country as well. So it's really kind
• 18:13
  Speaker 7: of twofold, not only you know, with the moving the
• 18:16
  Speaker 7: dirt and the facilities, but also you know, longer term,
• 18:19
  Speaker 7: we think the secular tailwinds around power generation are you know,
• 18:23
  Speaker 7: pretty favorable.
• 18:25
  Speaker 2: Hey, Chris, before you go, we have like about a
• 18:26
  Speaker 2: minute or so left. People usually say this is like
• 18:29
  Speaker 2: the Bell Weather for a look at the economy. Is
• 18:31
  Speaker 2: this company can going to continue to be that spot
• 18:35
  Speaker 2: and to hold that title.
• 18:37
  Speaker 7: I don't see anything changing in the near term here.
• 18:40
  Speaker 7: They are the largest global manufacturer of heavy machinery. They
• 18:46
  Speaker 7: have the scale, the dealer network, and really there's not
• 18:50
  Speaker 7: too many competitors that are are that close to them.
• 18:53
  Speaker 7: So they are the leading indicator for the heavy machinery
• 18:58
  Speaker 7: markets and construction activity. And I don't foresee that changing
• 19:01
  Speaker 7: anytime soon.
• 19:02
  Speaker 5: All right, Chris Chilian, I thank you so much. We
• 19:04
  Speaker 5: appreciated that. Chris Chilian covers all the big equipment manufacturing
• 19:08
  Speaker 5: companies for Bloomberg Intelligence. Just leaving a Caterpillar here based
• 19:10
  Speaker 5: in Irving, Texas, one hundred and thirteen thousand employees. It's
• 19:15
  Speaker 5: got a market cap of two hundred billion dollars, stocks
• 19:20
  Speaker 5: up like twenty percent this year. It's Chris was saying,
• 19:23
  Speaker 5: one of the plays on this data data center construction plays.
• 19:27
  Speaker 5: I mean, there's so many peripheral derivative plays off of AI.
• 19:33
  Speaker 5: It even gets to Caterpillar, who's going to be you know,
• 19:36
  Speaker 5: their equipment's can be used to build all these data
• 19:38
  Speaker 5: centers that are going to be used for AI. It's just,
• 19:42
  Speaker 5: you know, it's everywhere.
• 19:43
  Speaker 2: Have you ever been on one of these machineries. They
• 19:45
  Speaker 2: are massive. Some of the I know, like the bulldozers.
• 19:48
  Speaker 5: And that you know Karen Ubelheart who's covered these names
• 19:52
  Speaker 5: for decades. She's got some amazing pictures of her up
• 19:54
  Speaker 5: on these most big farms, on these huge tractors, and.
• 19:57
  Speaker 2: What it takes behind it to make these is is
• 20:00
  Speaker 2: It's incredible.
• 20:00
  Speaker 5: I'd love to see a manufacturing facility to see how
• 20:02
  Speaker 5: you make one of those huge tractors.
• 20:05
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