Citi expects to see Palantir earnings beat

Citi analysts have expressed optimism about Palantir Technologies (NYSE: NYSE: PLTR) ahead of its upcoming earnings report, predicting that the company will post a "slight upside" to expectations.

Despite a generally cautious outlook for the software sector, Citi highlighted Palantir as a standout performer.

"While we are more constructive medium-term on our data/analytics coverage as a beneficiary of GenAI greenshoots/tailwinds, we believe Q2 will still be somewhat choppy," Citi noted.

However, the firm sees a "solid Commercial momentum" for Palantir, even though there is some "Government uncertainty."

Citi analysts anticipate Palantir to deliver a one-point beat on topline metrics in the second quarter, with potential upside on profitability metrics.

The analysts remain positive following a recent visit to Palantir's headquarters, which left them "incrementally positive on Commercial/AIP momentum."

They believe that while monetization and revenue traction are still in the early stages, the company is on a promising path.

The report also mentioned that government contracts remain depressed, but management expressed confidence in long-term acceleration.

"Government contracts still seem depressed though our conversations with management highlighted confidence for acceleration in the long-term, but expressed some caution near-term," said Citi. "Recent government data in figure 19 indicates a steep decline of more than 60% driven by a DOD contract which might had included some catchup payment last 2Q."

In light of these factors, Citi has slightly increased its long-term growth rates for Palantir's commercial and government sectors, raising its target price to $28 per share.

The adjustment reflects the analysts' confidence in Palantir's ability to navigate current challenges and capitalize on emerging opportunities.

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