Large-cap Information Technology company Palantir Technologies is down -2.5% during this morning's trading session, while the S&P 500 moved -0.0%. With last year's reported gross margins at 17.6%, you might be wondering if today's drop is an opportunity to pick up shares of a profitable company at a discount.
Gross margins give insight into the basic economics of the company' product line and its pricing power in the target market, yet it's essential to balance this with a review of Palantir Technologies's operating margins. Operating margins take into account the company's fixed overhead costs, in addition to the cost of revenue used to calculate gross margins.
Is Palantir Technologies plagued with bloated overhead expenses that are eating away at an otherwise profitable business? Or is the company currently unprofitable because it is in a growth phase? A combined analysis of both gross and operating margins can help answer these questions, so that you understand what kind of business you are investing in.
| Date Reported | Revenue ($ k) | Cost of Revenue ($ k) | Gross Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 2,045,007 | 1,684,369 | 18 | 38.46 |
| 2022 | 1,905,871 | 1,658,523 | 13 | 360.0 |
| 2021 | 1,541,889 | 1,613,531 | -5 | 93.33 |
| 2020 | 1,092,673 | 1,913,805 | -75 |
By reviewing several years of Palantir Technologies's income statemet, we can see that, although gross margins are currently positive, the company has on average lost money on each of its sales with an average gross margin of -12.2%. Cost of revenue has been changing at a rate of -3.1%, while its revenues have a growth rate of 17.0%. As a result, gross margins have a delta of 5.4%.
| Date Reported | Total Revenue ($ k) | Operating Expenses ($ k) | Operating Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 2,045,007 | 1,684,369 | -2 | 75.0 |
| 2022 | 1,905,871 | 1,658,523 | -8 | 70.37 |
| 2021 | 1,541,889 | 1,613,531 | -27 | 74.77 |
| 2020 | 1,092,673 | 1,913,805 | -107 |
The table above tells us that, on average, Palantir Technologies has not been profitable over the last four years, which should be a warning sign to prospective investors. One bright spot, however, is that the company's operating margins are growing at an average yearly rate of 64.7%.
