Palantir posts slowest revenue growth in two years on sluggish Europe demand

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(Reuters) -Palantir Technologies Inc posted its slowest quarterly growth in revenue since going public in 2020 due to weak demand for its data analytics software in Europe, while a strong dollar weighed on its profit, sending its share down 8.5% on Monday.

The company, known for its work with the U.S. Central Intelligence Agency, has been trying to cut its reliance on uncertain government contracts by seeking more commercial business.

But in the third quarter, revenue from the segment declined nearly 3% to $204 million from the previous three months, raising doubts among Wall Street analysts about sustained revenue from commercial deals amid rising cost of borrowing.

“What I believe and other people should talk about is that we are going to see negative impacts because of strong dollar… because of sluggishness to adopt new technologies in Europe,” Chief Executive Alexander Karp said on an earnings call.

The company once again leaned on renewals and expansions of existing U.S. military deals in the third quarter, which helped it close about $1 billion in government contracts.

Analysts had expected the Ukraine war to draw in more business to Palantir, but finance chief David Glazer said the timing of new government contracts remained uncertain.

“We saw some improvement in backlog, but government only grew by 4% quarter-over-quarter and commercial was actually down quarter-over-quarter, which is not something we want to see in a subscription model,” RBC Capital Markets analyst Rishi Jaluria said.

Palantir’s revenue rose only 22% to $477.9 million. Excluding items, it earned 1 cent per share compared with expectations of 2 cents.

Adjusted earnings per share narrowly missed market expectations, also due to its investments in special purpose acquisition companies, finance chief Glazer said.

Palantir said it expects fourth-quarter revenue to be between $508 million and $510 million, excluding a $5 million forex impact. Analysts on average expect revenue at $502.7 million.