Palantir’s Business Approach
Palantir Technologies Inc. (NYSE:PLTR) is a leading big data software provider that operates on a Software as a Service (SaaS) business model. The company primarily focuses on serving governments, large enterprises, small businesses, and startups. Notably, their software has the unique ability to scale with the organization, strengthening as the organization grows.
Recently, Palantir integrated large language models (LLMs) into its AIP platform, enhancing its user-friendly interface and overall performance. Notably, the company’s approach to sales is distinct; they rely on a few dedicated support agents for each deployment, allowing the software to essentially sell itself by deepening existing relationships or cross-selling to associated businesses – a strategy successfully exemplified by Skywise, initially built for Airbus SE (OTCPK:EADSF) but expanded throughout the airline industry.
Their platforms are deployed through Palantir Cloud hosted via various CSPs, or on-prem, with Apollo enabling seamless integration of multiple infrastructures.
Palantir boasts a diverse range of platforms:
Gotham: Unleashing Big Data Analytics
Gotham is tailored for big data analytics and end-user data exchange and primarily caters to governments and large financial institutions. Its application extends far beyond finance, delving into industries such as insurance.
Foundry: The Central Nervous System for Data
Foundry serves as a central operating system for data, allowing users to integrate and analyze data in one place rapidly. This aligns with Palantir’s mission to empower organizations to transform massive data into an integrated asset reflecting their operations.
Apollo: Ensuring Continuous Operation
Apollo functions as a cloud-agnostic, single-control layer that ensures the continuous operation of critical systems. This underlines Palantir’s commitment to enabling the secure and rapid delivery of its software and updates across business operations.
AIP – The Artificial Intelligence Platform
The company’s latest product, AIP, allows users to seamlessly connect LLMs with their data and operations, facilitating swift decision-making. Notably, the customer onboarding process includes AIP Bootcamp, enabling end-users to effectively embrace AIP.
Skywise: Elevating the Aviation Sector
Skywise, the central operating system for the airline industry, has rapidly gained adoption, expanding to over one hundred airlines since June 2017. This intriguing product-led growth signifies a potential industry-agnostic tailwind for Palantir.
Pivotal Business Characteristics
Data as an Asset:
Palantir is positioned at the crux of the data revolution, enabling customers to synthesize massive datasets and conceptualize effective solutions, further accelerated by AIP. Their platforms are meticulously designed to bring instantaneous value and interoperability across various user levels.
Ethical Business Practice:
Palantir is guided by an ethical compass, turning down business opportunities that do not align with their ethical standards. Notably, they refrain from serving customers or governments that fail to meet their ethical criteria, displaying a steadfast commitment to principled operations.
Formidable Entry Barriers:
The company actively pursues complex projects, capitalizing on their aptitude for managing intricate data environments, strict government clearances, cloud-agnostic integration, and navigating lengthy sales cycles. Their resolute approach to initiatory requirements fortifies their competitive position, effectively mitigating competition from their customers’ internal software development. Furthermore, AIP Bootcamp addresses competitive risks, making platform onboarding significantly more accessible.
An Insightful Look into Palantir Technologies Inc.
Strategic Focus
Palantir Technologies Inc. exemplifies a clear and purposeful focus: to make its principal software platforms accessible to an increasingly wide array of the potential market. With unwavering determination, the company is committed to addressing the challenges faced by various institutions, aligning its products to meet these pressing needs.
Furthermore, their current R&D endeavors are strategically aimed at leveraging software, models, and other critical assets at the edge. This includes integrations with complex hardware, operations in disconnected environments, and more. In their keen pursuit of edge computing, Palantir is positioning itself to capture a significant market share in this burgeoning sector.
Culture and Ethics
In addition to their pronounced focus, the company fosters a culture of meritocracy, where promotion is based on achievement rather than bureaucratic politics or tenure. This approach promises to cultivate a robust talent pipeline, allowing high-performers to ascend to senior roles irrespective of age.
Moreover, Palantir demonstrates its unwavering commitment to privacy by design, ingraining this principle into the development of its software. The company endeavors to eliminate the historical trade-off between privacy and utility in software platforms, prioritizing the protection of individual privacy in a landscape accentuated by rapid digitization.
Financial Performance
Income Statement
Palantir’s rapid growth is underscored by its robust management of this expansion. Notably, the revenue distribution, with 62% from the U.S. and 11% from the UK, reflects a strong U.S. revenue profile complemented by a consistent year-over-year growth in U.S. revenue, indicating a resilient performance in this key market.
The third quarter saw a remarkable ~$100m in revenue growth with minimal COGS increment, portraying a compelling demonstration of effective operating leverage. Additionally, Palantir’s revenue growth outpacing both COGS and OpEx growth underscores its overarching operational efficiency and prudent cost management.
Looking ahead, the company anticipates a turning point in profitability in 2023, signaling a positive trajectory. Moreover, an impending S&P 500 eligibility in 2024 is expected to usher in substantial institutional inflows, bolstering its financial fortitude.
Balance Sheet
The company’s investments in marketable securities experienced a substantial upswing in 2023, particularly in U.S. treasuries. This strategic diversification is anticipated to yield significant interest income, reinforcing Palantir’s financial resilience and resource optimization.
Furthermore, the company’s sound current ratio and prudent management of total liabilities position it favorably, indicating a steadfast balance sheet posture suitable for a growth-stage software enterprise.
Other Important Metrics
Palantir’s strategic initiatives include a share repurchase program and a notable 13% year-over-year growth in average revenue from its top 20 customers, nurturing strengthened client relationships and revenue diversity.
Despite a Seeking Alpha valuation grade of D-, the company’s compelling PEG valuation unveils an undervalued outlook when factoring in forward growth, presenting an attractive opportunity despite the inherent volatility.
Closing Reflections
When assessing Palantir’s fundamentals, the prevailing risk of equity dilution is met with strategic measures, such as the recent announcement of a share repurchase program, underscoring the prudent risk management undertaken by the company.
Furthermore, with the imminent prospect of S&P inclusion, and the inevitable acceleration of digitization globally, Palantir’s strategic alignment positions it advantageously to capitalize on the burgeoning trends in digitization and business transformation, fostering an optimistic outlook for the company’s future growth and prosperity.
In culmination, Palantir Technologies Inc. presents a compelling investment proposition, marked by robust fundamentals, strategic foresight, and a fervent commitment to value creation, aligning it to thrive amidst the evolving landscape of technology and enterprise.
