AI industry leaders Palantir (NYSE: NYSE:PLTR) and C3.ai (NYSE: NYSE:AI) have experienced a significant rise in their stocks this year, with increases of 134% and 121% respectively. Despite these gains, both companies are trading significantly below their all-time highs; Palantir has seen a decrease of about 61%, while C3.ai has dropped by 86%.
Today, Palantir reported profitability for three consecutive quarters on a GAAP basis, indicating real earnings and providing positive guidance for continued profitability. The company's sales rose by 13% YoY in Q2, with an expected acceleration to 16%. Furthermore, Palantir launched its AI Program (AIP) suite, boasting over 100 users and another 300 potential enterprise customers, thus showcasing the potential of Palantir's AIP.
However, the company's valuation remains high, trading at more than 14.5 times this year's expected sales and 66 times adjusted earnings. The future performance of Palantir involves a great deal of speculation due to uneven growth since its public debut in 2020.
On the other hand, C3.ai launched its generative AI suite and witnessed a YoY revenue increase of 10.8% in Q1 of FY2024, targeting an annual revenue growth of approximately 15%. This demonstrates the company's sustainability in sales growth. However, C3.ai’s valuation is also high, trading at roughly 9.5 times this year's expected revenue.
The company expects an adjusted operating loss between $70 million and $100 million this year but remains on solid financial footing for the foreseeable future. C3.ai's midpoint guidance targets an adjusted loss of $85 million this year, indicating a delay in reaching profitability.
Despite the high-risk nature of these stocks due to their valuations, Palantir's consistent GAAP profits, stronger position in the AI market, AIP potential, and resources for growth initiatives make it a more promising investment. However, the future performance of both companies involves substantial speculation due to the high-risk nature of their valuations.
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