By Chavi Mehta
(Reuters) -Palantir Technologies Inc missed quarterly profit estimates and forecast weaker margins on Thursday, as the data analytics software company boosts spending to rebuild its platform and bolster a growing commercial business.
Shares of Denver-based Palantir dropped more than 12% and were the most traded across U.S. exchanges, after the company said it expects an adjusted operating margin of 27% in fiscal 2022, lower than 2021's 31%.
However, it forecast current-quarter sales above estimates after a steady flow of government contracts and a strong U.S. commercial portfolio boosted fourth-quarter revenue. Palantir also tripled its commercial customer count to 147 in 2021.
"I'm not surprised to see margins coming down, it feels like they 'overearned' and now are going to invest more aggressively," said RBC analyst Rishi Jaluria.
Known for its work with the U.S. Army, the Central Intelligence Agency and other government bodies, Palantir's next leg of growth is widely expected to come from commercial contracts with large businesses.
"You are starting to see that the U.S. commercial business is starting to dominate," Chief Operating Officer Shyam Sankar told Reuters in an interview.
The company, which is looking to expand into Europe this year, has also been building its sales force to close more deals quickly.
Palantir, backed by tech billionaire Peter Thiel, forecast first-quarter revenue of $443 million, above a Refinitiv IBES estimate of $439.2 million.
Experts have raised concerns over Palantir's reliance on large deals with a few customers and its dependence on government contracts, which make its revenue flow uncertain.
Addressing the concerns, COO Sankar said the company's net dollar retention rate reveals the "stickiness" of its software with customers. Palantir disclosed the metric for the first time, reporting a rate of 131% in fiscal 2021.
Excluding items, the company posted quarterly earnings of 2 cents per share, lower than an estimate of 4 cents.