Palantir Jumps After Reporting Record Quarterly Sales Growth

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1:15Learn more at thehartford.com slash risk mitigation. Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. There's been a ton of earnings out. It's hard to keep up with all of it. But one that has been the talk of everywhere is Palantir, right? And one person who has been running around Bloomberg like crazy is Mandeep Singh.

1:59He's Bloomberg Intelligence Senior Tech Industry Analyst. Thanks for coming out, Mandeep, right in the studio. The stock price surged more than 500 % over the past year. I mean, this company is incredible. Is it what the company CEO calls a dominant software company of the future, would you say? I mean, clearly there is a lot baked into the valuation, but I want to focus on, you know, the net new ARR, which is a metric that software companies are measured on. And when you compare Palantir's commercial segment revenue, which everyone is excited about, their total deal value that's remaining is around$2.8 billion.

2:41The new ARR increased by$500 million. Contrast that with a Microsoft or a Google Cloud. Microsoft added almost$9 billion in net new ARR this quarter. And they talked about, you know, AI being used across 100 million Microsoft co-pilot users, 20 million GitHub co-pilot users. So from that perspective, you know, Palantir's increase in remaining deal value of 500 million looks pretty small. I mean, Palantir's overall revenue run rate is 4 billion. Microsoft clearly is, you know, a company that's almost 100 times or 80 times more bigger than Palantir. But it just goes to show that even on a net new ARR basis, Microsoft is adding more revenue per quarter than a Palantir is.

3:39And still people are very excited about Palantir's, you know, prospects. And to my mind, clearly, you know, they have a product that is appealing to a certain section of enterprise users. But at this valuation, I mean, they can't sustain that for the next 30, 40 quarters, which is what they need to show to grow into the valuation. And I just don't see from a product perspective, they'll have the same kind of appeal as a Microsoft Copilot or a Google Cloud or, you know, any of these large companies. Dumb question of the day. How do you guys value this thing? I mean, I got it at like 200, 300 times earnings.

4:19So that's not the way to go. So we've seen that with, you know, new IPOs. When they come to the market, they get a premium multiple. They get traded at, you know, 30, 40 times sales. Snowflake, which is a competitor to Palantir. When it went public, it traded at 60, 70 times sales. Look at where the stock is now. It's flat since the IPO. Even though the company has grown top line at 30, 35 % CAGR, the stock is flat. So that's what I mean by growing into the valuation because there is so much embedded in that upfront multiple that even growing at 30 % is not enough. Palantir really needs to grow at 50 % to be able to show any sort of stock return from this point on.

5:05Can it do that? No, I mean, that's why I said I compare the product. My initial comments were around comparing Palantir's product versus other large enterprise software makers. And even, you know, you go down the list, Salesforce, ServiceNow, Adobe, like these are much bigger companies. And they have compounded at 20 percent CAGR over the years because they had a seed based or a consumption based model. We don't even know what kind of a business model Palantir has. Yes, it's winning government deals. Yes, it's winning some enterprise deals. But we don't know how they account for that revenue every quarter.

5:44Is it a seed based model? Is it consumption based? We don't have that kind of visibility to their business model. All right. Let me get this red headline out of the way. White House fires most of Puerto Rico's oversight board members. Not really sure what that is, but we're going to have more reporting on that coming up. I want to get that headline out there. So in a cocktail party, I can tell you the Google story. I can tell you the Microsoft story. I have no idea what the Palantir story is. Can you explain it to me like I'm a five-year-old? Yeah, so their software out of the box will help you make sense of your big data strategy.

6:21They really carved out a name for themselves when big data became the thing, when a company had a large amount of data, whether it's log data or some other type of reporting data. They would help you make sense of it because they have something proprietary that no one else has in terms of organizing that data and making it usable. So that's their value proposition. But with the AI wave and LLMs, they were able to integrate LLM calls within their offering to develop a customer service or a supply chain use case that you can apply AI on top of their ontology, which is their core product. And a lot of other companies are doing the same.

7:05To my mind, Microsoft is doing the same for their customers. They're trying to embed OpenAI with their core offerings, with their CRM system, and help them deploy a customer service use case. So the differentiation of Palantir versus Microsoft, to my mind, is not that big as the valuation reflects. And that's where I'm betting they're not going to grow 40, 50 percent for the next 12 to 20 quarters, which is what the valuation is implying. Now, how would you compare what they do as far as a government contractor versus the commercial side? Like which is doing better for them? Yeah, so they have a much higher exposure to government side.

7:43I mean, government side is still more than 50 % of their revenue. And all these large enterprise software companies, they have 10 to 15 % government exposure. So Palantir's government exposure is way too large compared to other software makers. And on top of that, their international sales seem to be declining, at least, you know, on the commercial side because of the polarizing views of the management. So if they were more balanced, probably they would win more international business. But right now, this is a U.S.-centric story. And that's where I think it sort of puts a dent to the growth rate down the line once they run out of the deals that they currently have signed.

8:26What's the next thing we need to pay attention to? Is there anything earnings-wise coming up this week? AMD tonight. AMD tonight. Clearly, a lot of that CapEx, if it is flowing to AMD, should show up tonight. And our view is clearly the market is shifting from training to inferencing when it comes to CapEx. And AMD could be one of the beneficiaries of that inferencing CapEx. AMD is the ticker. It's got a market cap of$280 billion. The stock is up 42 % year-to-date. So another one of Mandeep's stocks is up, like, huge. I mean, this kid was born on third base, thought he had a triple. Dude, everything you touch just rips to the sky.

9:08It's unbelievable. Mandeep Singh, he's one of the good ones, folks. Senior tech industry analyst for Bloomberg Intelligence. In fact, Ian Anurag Rana, they manage our whole tech coverage area, and it is a global business, and we cover it. We have analysts in Europe, Asia, and North America, and that's how we do that. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. We're nearing kind of like the Friday mark where the TGIF, right?

9:42Molson Coors happy hour. Let's go for it. They had their earnings come out. So we want to do is break it all down for you. Kenneth J, Bloomberg Intelligence Senior Consumer Product Analyst. Thanks for coming right here in the studio. Rising costs tied to aluminum tariffs. This was a big point for them. How much of an impact is that having on the company? Yeah, hi, Lisa. It's material. You know, they describe it as an indirect cost, but it really spiked up there in the quarter, you know, encroaching on their margin. I think, though, the bigger picture, though, here is the continued week sales, the lackluster sales we're seeing in the U.S.

10:20beer market. And alcoholic beverages in general, you know, this is their peak summer selling season. This is when, you know, these companies should be thriving. And it looks like the summer selling season in the U.S. for alcoholic beverages is going to be a dud. It's a cautious consumer. It's particular pressures on the Hispanic demographic. It was a lousy June in terms of the weather in key markets. And basically all the big brewers are setting up for a tough second half. If these trends continue, expect continued sluggish performance in the second half as well. So is this beer thing kind of a global thing?

11:02I mean, I know you guys at Bloomberg Intelligence, you've got the data that shows consumption of everything out there. In the case of Molson Coors, Paul, yeah. They have a big operation in Europe, Eastern Europe, many parts of Western Europe, and they had lower volumes as well. It was saved by higher prices to a degree, but, you know, again, the big picture is that consumers are just not going out to the bars as much. On-premise sales were particularly weak. That could be weather-related. I mean, that's just another example. But also, I think it could be the culmination of a lot of price increases over the last few years.

11:40Maybe we've hit a point where there's some sticker shock going on here. And what about people drinking? You said not going to the bar, but what about just drinking less alcohol in general? Well, that's a great point, Lisa. I think longer term, you have some secular headwinds as well. Things we've talked about in the past, you know, the spread of legal cannabis, particularly here in the U.S. In the U.S., you also have these intoxicating hemp drinks, which are all the rage now in many markets. You have the GLP-1 users are cutting back. Gen Z doesn't seem to embrace alcohol as much as their parents did.

12:14All those things are weighing on it longer term. But that combined with some near-term pressures is really weighing on these companies. It's a disappointing discussion here. I mean, I thought we were going to have fun here. I'll tell you, here's the problem. with all this White Claw and Seabreeze and, I don't know, the iced tea and vodka. What's that all about? Is that a fad? It seems to have some legs there. You know, the pre-mixed cocktails. Well, let me put it this way. Some of the things that did well in the quarter are things like Bush Light Apple. You know, some flavor out there is coming back.

12:52You know, some of the hard teas are doing well. The premixes continue to do well. So I think what you could take away is maybe the consumer, while economizing, is also looking for flavor and different variety. And also the non-alcoholic and low-alcoholic segment continues to do well from a low base. So I think in the second half, I would expect a higher level of promotion and innovation along those themes. Low-alcohol, no-alcohol, flavor, innovation. That's going to be really popular, I think, in the second half to spur volume. Hey, before you go, Kenneth, can you break down some of those macroeconomic headwinds that the company is facing?

13:33Sure. Well, the primary one is just, you know, consumer confidence. Consumers just feel, you know, they read the papers, all these, you know, tariff uncertainties and, you know, the pressure on the Hispanics in particular, what's going on there. Those are the big things. I don't think it's anything major, but it's just enough on the margin that these are purchases that can be deferred, and consumers by and large are. All right. This wasn't very fun. Ken Shea, Senior Consumer Products Analyst at Bloomberg Intelligence, joining us from Princeton. When your options are limited, so are your opportunities.

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16:12Elevate your wins with Adio. Start your free trial at adio.com slash iHeart. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. tariffs having a bigger impact on caterpillar margins shares are lower they're down about two tenths of percent so here to break down its earnings report christopher cheleno bloomberg intelligence senior u.s machinery analyst uh christopher thanks for joining us this morning all that said the ceo joe creed the new ceo he said the company is going to be able to offset the impact of tariffs did he get into how they're going to do that yeah the focus initially now is really going to be on the cost side of the equation and really some you know internal initiatives and productivity to help mitigate the tariffs.

17:04They are going to have to raise prices eventually, but I think that's probably more of a 26 story. Right now, they're doing their best to mitigate this internally. Talk to us about underlying demand out there for Caterpillar tractors. What's the company saying? I think this is really the big takeaway from the quarter. You know, the print was a little weak. It came in a little below expectations. But I think the big takeaway here is that underlying demand is still pretty darn resilient. You had backlog up sequentially again this quarter, which set another record. You had improving order trends across all three of their main businesses.

17:44Dealer inventory still remained quite low. And the company actually raised their sales guidance for the year. So, you know, that seems to suggest to us that underlying demand is still intact despite all these tariff headwinds. And now how do their results kind of match up to some of their peers? I believe there's Terex, Lindsey, who already opened their books. How does Caterpillar match up? Yeah, I'd characterize the overall earnings season for U.S. machinery is kind of mixed. If you think about really construction peers, which is kind of more Caterpillar's sweet spot, that's a market that's, you know, kind of bouncing along the bottom here.

18:24We do have, you know, infrastructure projects and these large mega projects, which are helping to offset some of the weakness that you're seeing on the private non-residential side, things that are more interest rate sensitive. But, you know, you're starting to see some positive indicators that would, you know, lead us to believe that you're going to start to see a cyclical recovery emerge in 2026. There's a number of, you know, leading indicators out there that would support that. And I think really caterpillars results here with orders being up in the construction business with the backlog being up really kind of reinforce that view where does caterpillar make their big trucks and stuff like that everywhere right they're a they're a global company they've got a large footprint that spans you know every continent and you know most countries but if you think about it at the end of the day, it's North America, right?

19:17It's more than half of their revenues. Europe is called it, you know, 20 percent-ish. Asia Pacific, a little bit below that. And then, you know, Latin America is kind of closer to 10 percent. They are a net exporter out of the U.S., but as we saw today, you know, tariffs probably going to be a little bit more of a headwind than they had initially anticipated. They're looking for, you know, somewhere between a a$1.3 to$1.5 billion hit for this year. So Chris, you kind of touched upon this. Sales slipped in construction resource industries, but energy and transportation unit, that had some higher sales.

19:51What is that driving force behind the growth in engines and transportation? So this continues to be one of really the big highlights for Caterpillar, you know, despite some of the cyclical softness that they're seeing, is the energy and transportation business, particularly in power generation. So think data centers that are becoming an increasingly big, larger part of the portfolio. PowerGen continues to drive outsized growth within the energy and transportation business. There's a multi-year backlog there, so we have very tremendous visibility. And what Caterpillar is doing now is really expanding capacity to help meet this growing demand for data centers and power generation.

20:35So there's a long secular tailwind at play here. And really, you know, we think we have pretty good visibility here over the back half of the decade. So is Caterpillar and companies like Caterpillar, are they benefiting or do you expect them to benefit from maybe on-shoring even more manufacturing in this country? To the extent that President Trump wants to do that, and he's been talking about that a lot, is that something where Cat will see it? Yeah, I mean, I would say we haven't really heard of, you know, I would say concrete or tangible evidence of that happening yet. And it's really difficult to, you know, get a lens on that in a quarter to quarter.

21:18I think, you know, if we look back maybe over a five-year window, maybe we'll have a better picture of that. But yet, no doubt, Caterpillar is a big beneficiary of any kind of construction activity here domestically. And then not only on top of, you know, not only just moving the dirt and building the facilities, they're also, like I mentioned, having a bigger piece of the data center and power generation needs within our country as well. So it's really kind of twofold, not only, you know, with the moving the dirt and the facilities, but also, you know, longer term, we think the secular tailwinds around power generation are, you know, pretty favorable.

22:00Hey, Chris, before you go, we have like about a minute or so left. People usually say this is like the bellwether for a look at the economy. Is this company going to continue to be that spot and to hold that title? I don't see anything changing in the near term here. They are the largest global manufacturer of heavy machinery. They have the scale, the dealer network, and really there's not too many competitors that are that close to them. So they are the leading indicator for the heavy machinery markets and construction activity. And I don't foresee that changing anytime soon. All right, Chris Cialino, thank you so much.

22:39We appreciate that. Chris Cialino covers all the big equipment manufacturing companies for Bloomberg Intelligence. Let's look at Caterpillar here. Based in Irving, Texas, 113 ,000 employees. It's got a market cap of$200 billion. Stocks up like 20 % this year. as Chris was saying, that one of the plays on this data center construction plays, I mean, there's so many peripheral derivative plays off of AI. It even gets to Caterpillar, who's going to be, you know, their equipment's going to be used to build all these data centers that are going to be used for AI. It's just, you know, it's everywhere.

23:19Have you ever been on one of these machineries? They are massive, some of them. I know. Like the bulldozers and the... You know, Karen Ubelhart, who's covered these names for decades, she's got some amazing pictures of her up on these big farms, on these huge tractors and earth movers and things like that. Yeah, so what it takes behind it to make these is incredible. I'd love to see a manufacturing facility to see how you make one of those huge tractors. This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m.

23:51to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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