📊 The Rise of Palantir

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Happy Sunday!

Earnings season is in full swing, with 62% of S&P 500 companies having reported Q4 2024 results so far.

How are things compared to expectations? Things are looking solid, based on data collected from FactSet.

• 77% of companies have reported EPS above estimates, beating the 10-year average of 75%.

• Both the percentage and magnitude of earnings surprises are trending above historical norms.

• The biggest beats have come from those in the industrials, consumer discretionary, and health care sectors.

So far, companies that have reported are seeing 16.4% YoY earnings growth—on pace for the highest since Q4 2021.

Revenue, however, has been a bit more mixed:

• 63% of companies have topped revenue estimates, slightly below the 10-year average of 64%.

• On aggregate, revenue is coming in 0.9% above estimates, below the 1.4% historical norm.

Meanwhile, the S&P 500 remains pricey, with a forward 12-month P/E of 22.1—but if these results keep up, bulls might argue it deserves the premium.

Some key data bites from this week that you should know:

• OpenAI will raise $40B from SoftBank at a $260B valuation.

• Vanguard will save investors $350M due to expense ratio cuts.

• Meta's total investments in VR/AR will surpass $100B this year.

• Ferrari delivered 13,752 cars in 2024, with net profit up 21% YoY.

• Bill Ackman is now holding a $2.3B stake in Uber.

• Uber saw Q4 Gross Bookings increase 18% YoY to $44.2B.

• Philip Morris shipped nearly 165M ZYN pouches in Q4, up 42% YoY.

• Amazon Web Services saw sales cross $100B for the first time in 2024.

• PayPal announced a new $15B share repurchase.

• Warren Buffett now owns more than 35% of SiriusXM.

• Marko Kolanvoic sees the S&P 500 plunging 1,000 points or more.

• AMD saw Data Center revenue climb 69% to $3.9B, but below $4.1B expected.

• Ford lost roughly $37,000 for every EV sold in Q4 2024.

• Disney+ lost 700,000 subscribers in the most recent quarter.

• Super Bowl LIX sports betting is expected to cross $1.3B.

In today’s newsletter:

• 🦾 Palantir’s Rise

• 🎵 Spotify’s Cash Flow

• ☁️ Google Cloud’s Growth

• ₿ MicroStrategy’s Rebrand

• 👻 Snapchat’s Loss Streak

Let’s jump right in.

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The best-performing stock in the S&P 500 last year? Palantir.

• Want to take a guess who is leading the S&P 500 again this year? Yep.

The king of the S&P 500 is already up nearly 50% this year, fueled by a post earnings surge.

Key numbers from the Q4 earnings report:

• Adj. EPS: $0.14 vs. $0.11 Est.

• Revenue: $828M vs. $776M Est.

• Full-Year 2025 Guidance (Midpoint): $3.75B vs. $3.52B Est.

Both of Palantir’s key segments showed strong growth.

• Government revenue climbed 45% YoY, while the commercial segment surged 64% YoY. 

• Customer count also rose 43% YoY to 711.

The company achieved a remarkable Rule of 40 score of 81%.

• The Rule of 40 is a key SaaS metric that combines revenue growth and profit margin. Anything above 40% is considered strong.

But with a massive rally comes valuation concerns.

Palantir isn’t cheap.

• The stock trades at nearly 90x sales, making it the most expensive S&P 500 company on a revenue multiple basis.

• Additionally, the company pulled in just $547M in 2024 (excluding one-time SAR-related expenses in Q4), but has a market cap of $252B.

• With this market cap, it is among the 40 most valuable companies in the world.

What happens next?

• Bulls argue Palantir is at the center of the AI revolution with a proven management team that can execute.

• Bears say history shows valuations this extreme are nearly impossible to grow into.

There’s nothing quite like hearing a song you love for the first time.

• Or generating a ton of free cash flow. That’s pretty beautiful too.

And that’s exactly what Spotify just pulled off after a remarkable 2024.

The company not only celebrated its first full year of profitability but also posted $2.4B in free cash flow.

• What’s incredible is this figure is larger than what it generated in the last nine years combined.

The rest of the numbers for Q4 looked solid too (figures in euros):

• Total Revenue: €4.2B (+16% YoY) vs. €4.19B Est.

• Gross Margin: 32.2% (+555 bps YoY)

• Operating Income: €477M

• Monthly Active Users: 675M (+12% YoY) vs. 664M Est.

• Subscribers: 263M (+11% YoY)

Investors loved it, and shares popped over 13% after earnings and are now up 36% YTD.

While Spotify’s stock jumped up, Google’s stock went in the opposite direction.

Shares fell 7% this week after the company missed overall revenue and cloud estimates.

Key numbers from the Q4 earnings report:

• Adj. EPS: $2.15 vs. $2.13 Est.

• Revenue: $96.47B vs. $96.56B Est.

• Google Cloud Revenue: $11.96B vs. $12.19B Est.

• YouTube Ad Revenue: $10.47B vs. $10.23B Est.

Google Cloud revenue climbed 30% YoY, an acceleration from the prior quarter, but still short of the 32.8% growth analysts were expecting.

• The bright spot? Google’s CFO noted on the earnings call that they exited the year with more demand than available capacity, signaling continued strong momentum.

However, outside of the cloud, every other segment grew at a slower pace compared to last year’s Q4.

• As a result, total revenue increased 12% YoY, down from 13.5% in the same quarter last year.

Perhaps the most surprising figure?

• Google announced $75B in capital expenditures for 2025, well above the $58.8B expected, showing no signs of slowing its AI investments.

Outside of the earnings report, one interesting statement made by Google’s Quantum AI lead was that commercial quantum computing applications could arrive within five years.

• This is far ahead of the 20 year estimate recently given by Jensen Huang.

MicroStrategy has officially rebranded to Strategy, fully embracing its identity as the world’s first Bitcoin Treasury company.

• Its new logo even features Bitcoin’s emblem—a fitting tribute, considering the company now holds 471,107 BTC, more than any other publicly traded firm.

The company’s Bitcoin buying spree began in Q3 2020, when holdings were just $0.4B. Since then, that figure has soared to $41.8B as of Q4 2024.

But because they’ve steadily added to their position—raising their cost basis—their actual return sits at just +50%.

For comparison, since Q3 2020:

• Bitcoin ($BTC) is up +947%.

• Strategy’s ($MSTR) stock? Up a staggering +2,672%, effectively trading like a leveraged bet on Bitcoin.

But while its Bitcoin stash and stock price continue climbing, its core business has been telling a recent story.

• In Q4, revenue missed expectations at $120.7M, while the company posted a $670.8M net loss, falling well below forecasts.

Snapchat just can’t seem to break its losing streak.

• For 2024, the company posted a $698M loss, extending a decade-long streak of unprofitability. 

• Since 2015, Snapchat has cumulatively lost $11.5B in net income.

But there’s a glimmer of hope—Snap actually turned a profit last quarter, posting $9.1M in net income.

The company reported Q4 earnings last Tuesday, beating most expectations:

• Adj. EPS: $0.16 vs. $0.14 Est.

• Revenue: $1.56B vs. $1.55B Est.

• Global DAUs: 453M vs. 451.1M Est.

• ARPU: $3.44 vs. $3.44 Est.

Looking ahead, Snap is projecting another profit in Q1, with adjusted earnings of $57.5M at the midpoint.

• However, that guidance fell short of analyst estimates of $78.5M, dampening investor enthusiasm.

• Shares jumped post-earnings but quickly reversed, ending the week down 1%.

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Notable Companies Reporting Earnings Week of February 10th, 2025:

I use EarningsHub to track earnings, estimates, and receive AI summaries of investor calls.

If you’d like an all-in-one earnings tool and see all other companies reporting, I definitely recommend you check it out!

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