Palantir quick profile
Introduction
Note: I suggest that before reading further, you must read my previous post: “What kind of company is Palantir?” The basic understanding of the company Palantir, and this article will not repeat the content.
Palantir’s offerings include tools used mostly by government agencies for intelligence gathering, counterterrorism and military purposes.
AI and big data leader
Palantir Technologies (ticker: PLTR) is a particularly iconic company in the technological wave of artificial intelligence in the past two years. Palantir uses artificial intelligence technology to analyze big data and help customers make decision-making analyzes on their products to meet customer needs.
Close relationship with US government
In the third quarter of 2024, revenue from government-related revenue accounted for 56.3%, and revenue from corporate customers accounted for 43.7%.
2024 Q3 result
The third quarter of 2024 summary:
- Revenue in increased by 30% year-on-year to US$726 million
- Net profit of US$148.2 million increasing by 106% year-on-year
- Earnings per share of US$0.06.
- Cumulative revenue in the first three quarters of 2024 has exceeded US$2 billion and net profit has exceeded US$400 million.
The financial report was better than market expectations. After the financial report was released, the stock price surged and hit a new high since the company went public
The company’s proud achievements
The man behind the bin Laden sniper attack
Palantir appears to be a private enterprise, but in fact it has close business relationships with intelligence agencies such as the U.S. Department of Defense and the Department of Homeland Security, because almost all of the company’s revenue from government departments is the U.S. Department of Defense. In May 2024, Palantir signed a five-year contract with the U.S. Department of Defense to help the U.S. Army design a Project Maven artificial intelligence combat system. The total contract value is as high as $480 million. The artificial intelligence combat system Palantir designed for the US Army should be a product related to military promotion.
Palantir previously helped the U.S. Department of Homeland Security build a database of global terrorists. In 2011, when the United States was hunting bin Laden, the top terrorist, it used the company’s Palantir Gotham big data analysis system to analyze Bin Laden and Al Qaeda. The behavioral pattern of organizing activities successfully helped the US military locate Bin Laden and complete the sniper plan.
Tested by real combat
On the Russian battlefield, Palantir’s artificial intelligence technology helped Ukraine hunt down Russian military bases. According to reports from Time magazine and the British military website, the artificial intelligence software provided by Palantir helps the Ukrainian military’s unmanned reconnaissance aircraft to independently identify targets such as personnel, tanks and armored vehicles, and transmit the information to Palantir. Thiel’s artificial intelligence software has greatly improved the identification capabilities of unmanned reconnaissance aircraft, from less than 50% previously to a hit rate of 80%.
Palantir’s artificial intelligence technology, combined with big data software, can effectively detect movements and artillery fire on the battlefield through data collected from manpower, intelligence, drones, radar and thermal imaging. sources and provide a variety of targeting options for battlefield commanders to consider. The functions Palantir’s artificial intelligence software plays on the battlefield can be called an artificial intelligence arsenal.
Not successful in the enterprise world
Try hard to develop enterprise customers
Palantir’s company value lies in the analysis and speculation of artificial intelligence systems. In addition to helping the military develop artificial intelligence data systems related to tactics and battlefields, it also has private commercial customers. It also helps customers with artificial intelligence system analysis and even helps customers make predictions. Give customers time to prepare in advance for major events that may occur in the future.
Enterprise customers in recent years
Airbus, Credit Suisse, JPMorgan Chase Bank and Merck Pharmaceuticals Group are all well-known large customers developed by the company in recent years.
Relying on U.S. government tenders
As mentioned earlier, in the third quarter of 2024, revenue from government-related revenue will account for 56.3%, while revenue from corporate customers will account for 43.7%.
Not favored by enterprises
With such a customer distribution, the proportion of revenue from governments and enterprises seems to be fairly even. But if you follow it for many years, investors can easily discover two facts:
- The total revenue from government customers has always been much larger than that from corporate customers. Even if the source of government customers is stable, the number of government customers is limited and is far less than the number of enterprise users.
- What’s even more fatal is that there are almost no long-term reliable corporate customers. This is a big crisis for listed companies, because it means that the products cannot win the trust of large customers.
Advantages and disadvantages coexist
Excellent relationship with the US government
Palantir’s relationship with senior US government officials can be described as “unparalleled.” Palantir founder Peter Thiel (see my post of “Zero to One” for details) is not only the boss of the “PayPal Mafia“, He is also one of the earliest investors in Facebook, and his venture capital company has an even more accurate vision, having bet on countless of today’s star technology companies before everyone else.
Peter Thiel’s connections in the Silicon Valley venture capital community and the U.S. government are unmatched, especially his excellent relationships with the Republican Party and right-wing American politicians. Long before anyone was optimistic about Trump, Peter Thiel was one of the major donors to Trump’s first presidential campaign, just like Musk’s role in Trump’s second presidential campaign.
In 2021, Peter Thiel introduced his apprentice, current US Vice President James David Vance, to Trump at Mar-a-Lago. No one in American business can match his connections and relationships, and this is the cornerstone of Palantir’s business empire and his most important asset – because many of his network will be in the next Hold an official or advisory position in the government.
On December 10, 2024, Trump appointed Jacob Helberg, a Silicon Valley technology company executive who has a tough stance on Beijing, as Under Secretary of State for Economic Growth, Energy, and the Environment at the U.S. State Department. One of the duties of this position is to develop and implement international policy for the United States related to science and technology. Helberg is a senior advisor to Palantir’s CEO.
Government bids are bright in the future
Palantir has almost no significant enough rivals in government bidding. Please note: the US government, especially the Department of Defense’s bidding, has very high entry barriers for suppliers. In addition to having extremely reliable political and business connections, manufacturers and employees All must pass national security-level loyalty assessments, reliability and safety reviews, and must have years of actual combat experience and results. In short, it is certain that Palantir’s future bids for the U.S. government will be bright.
Revenue from the government will increase
As global geopolitical risks become higher and higher, Palantir’s artificial intelligence technology analysis will have many applications in new weapons. Coupled with its close relationship with the US government, Palantir will not worry about new orders in the future. However, due to their close ties with the military, this type of company is shrouded in mystery. Even if its future operating prospects are bright, unless some consensus is reached with the U.S. military, it is unlikely that the company will significantly expand its scale, meaning that revenue is unlikely. , and it is not easy for a sudden explosion to occur.
Enterprise might hinder growth
Without long-term reliable corporate customers, it mainly relies on U.S. government bids for its livelihood. This means that the company’s long-term revenue growth is limited, and the company’s market value cannot become a super listed company.
Although Palantir reports a net dollar retention rate of 118% as of the third quarter of 2024; to be honest, this is a good number. However, the problem is that by relying too heavily on superficial numbers, investors may be misled. It did not break down the specific numbers for government and corporate clients, nor did it disclose the company’s customer contract renewal rates. From what I know and what the media has reported over the past few years, a number of large and famous companies have decided not to renew their contracts with Palatir.
There is a lot of room to grow on enterprise
Palantir’s U.S. commercial customer base has grown from 181 to 321 in the past year. There are thousands of such large companies in the United States alone, which is a virgin land that is waiting to be developed for Palantir.
In the past, Palantir’s performance in the field of enterprise users lagged far behind its performance in government departments, but for Palantir in the future, it seems that the management team has been making great efforts and has achieved initial results.
Organizing an alliance for defense contracts
Goal
Palantir and Anduril are in talks with dozens of competing technology companies to form alliances to jointly bid for U.S. government contracts. The goal is to overturn the situation in which a few major defense contractors monopolize government contracts and seek to divide the U.S. government’s annual defense budget of up to $850 billion from traditional major contractors such as Lockheed Martin, Raytheon and Boeing.
U.S. defense procurement has long been criticized as slow, anti-competitive and favoring a small group of established defense companies, which typically produce ships, tanks and aircraft that take years to design and build.
Favorable trends
These defense technology startups from Silicon Valley have attracted record funding since 2024, and their business leaders have actively engaged in politics, intervened in government personnel, established connections in government departments, and influenced government policies. Investors are betting that these companies will be the winners from increased federal spending on national security, immigration and space exploration after Trump takes office.
Advantages
The alliance will bring together some of Silicon Valley’s most valuable companies and leverage their innovative technology products. Silicon Valley’s defense industry prioritizes the production of smaller, lower-cost, autonomous weapons to supply the U.S. government with advanced defense and weapons. Capabilities provide a more efficient approach.
Relevant experience of alliance members
Palantir’s “AI Platform” provides cloud-based data processing, and in December 2024, it will integrate Anduril’s autonomous software “Lattice” to provide AI for national security purposes; Anduril will combine its anti-drone defense system with OpenAI’s advanced AI model. Combined, working together on U.S. government contracts related to “air threats.”
SpaceX and Palantir won large public contracts from the government 20 years ago, and some of the others in the alliance are the latest to become government contractors. OpenAI adjusted its terms of service in 2024 to no longer explicitly prohibit the use of its AI tools for military purposes.
Alliance Members
The alliance plans to be announced as early as January 2025, and companies discussed for joining include Musk’s SpaceX, OpenAI, self-driving ship manufacturer Saronic, and AI data company Scale AI.
Start to get involved in other fields
Actively want to change
Because of Palantir’s reliable revenue, it has long relied on bids from the U.S. government and a handful of Western allies that are very close to the United States. Palantir’s top management certainly knew the urgency of this issue, so they began to use their own advantages to establish relationships with business partners, hoping to change the single nature of the company’s business and expand the company’s products to customers outside the government, or to Application scenarios other than military and national security.
Cloud
In 2024 alone, Palantir has strategically cooperated with Microsoft, OpenAI, and Oracle, several heavyweight partners across the fields of cloud, artificial intelligence, and large enterprise applications, to help promote Palantir’s products. To a larger market and users.
National defense
Shield AI
Shield AI and Palantir announced a strategic alliance in December 2024 to improve the command and control capabilities of autonomous unmanned systems. The collaboration aims to provide scalable artificial intelligence solutions that can function without GPS or communications. Shield AI is furthering its goal to protect military personnel and citizens by delivering artificial intelligence-driven technology using Palantir’s Warp Speed, a manufacturing operating system designed to re-industrialize America.
Brandon Tseng, president and co-founder of Shield AI and a former Navy SEAL, emphasized the synergies between the two companies as the technology they create has been tested in difficult environments.
Anduril Industrial
Palantir and Anduril form a new alliance to ensure the U.S. government remains a world leader in artificial intelligence. The goal is to provide technology infrastructure from the edge to the enterprise to transform America’s world-leading artificial intelligence advances into next-generation military and national security capabilities.
The two sides actually have to resolve two main issues: First, data readiness, ensuring that national security data—sensitive data collected through sensors, vehicles, weapons, and robots at the tactical edge—will not be used. Used for artificial intelligence training and algorithm development.
Performance of the capital market
Market Cap
As of December 13, 2024, Palantir’s market value is US$173.21 billion, which is considered a large-cap stock in the U.S. stock market and is much higher than the market value of many well-known large technology companies you are familiar with.
Price-to-Earnings Ratio
As of December 13, 2024, Palantir’s price-to-earnings ratio was 384.87 times, a number that can only be described as crazy.
Stock price performance
As of December 13, 2024, Palantir’s stock:
- Since the beginning of 2024, it has risen by 358.81%.
- Since the company went public, it has only been 4 years and has risen by a total of 726.85% (please note that Palantir was listed on October 2, 2020).
- It is the No. 1 stock price performance in 2024 among all the components of the S&P 500 index!
Valuation is insane
Palantir’s stock currently trades at 49 times estimated 2025 revenue and 124 times free cash flow (FCF). The current valuation level is too high even in the face of transformative technological shifts such as AI data integration. Investors are advised to remain patient and wait for a better entry point.
I am the author of the original text, the essence of this story was originally featured on Smart Magazine, Issue of Febuary 2025
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