It is a truth universally acknowledged, that a company in possession of a fortunate trajectory, must be in want of continued success. Palantir Technologies, it would seem, has been most fortunate indeed. Over the past three years, its performance has exceeded that of the broader market – the S&P 500, as it is known – with returns that, whilst perhaps not entirely unprecedented, are certainly worthy of observation. A gain of 167% in the year 2023 was followed by an even more considerable advance of 340% in 2024, and the subsequent year has witnessed a further doubling of its value, a progression that might well cause even the most seasoned investor to raise a cautious eyebrow.
Tyler Radke, a gentleman of some discernment at Citigroup, anticipates a continuation of this agreeable state of affairs. He has, with a degree of confidence that is not entirely unwarranted, upgraded his assessment of the stock, suggesting a price of $235. His reasoning, gleaned from conversations with those who direct the affairs of large organizations, is that the demand for Palantir’s services will only increase as budgets expand and the applications for their technology multiply. Moreover, the American government, ever mindful of its own security, appears determined to modernize its systems, a circumstance which, naturally, bodes well for those who provide such services.
A Growth Most Remarkable
This strong performance, it must be observed, is not merely a matter of chance. It is directly attributable to a steady and accelerating growth in revenue, which has improved with each passing quarter since the middle of 2023. From a modest increase of 13% in that period, revenue growth has surged to a most respectable 63% in the most recent quarter.
Palantir’s initial successes were, of course, largely confined to the realm of government contracts, providing platforms – Gotham, as it is known – for the gathering and analysis of data, a service of considerable importance in these uncertain times. However, the company has wisely extended its reach to the commercial sector, offering a similar solution – Foundry – but it was only with the introduction of its Artificial Intelligence Platform – AIP – that its prospects truly brightened. It is a common observation that artificial intelligence is prone to flights of fancy, to “hallucinations,” as some call them; however, a single, reliable source of data can greatly mitigate this tendency, rendering the technology far more useful in practical applications.
Foundry AIP gathers data from a variety of sources, organizing it in a manner that links it to real-world counterparts, be they physical objects or processes. This clean, organized data then allows customers to employ large language models – LLMs – to gain actionable insights, solving problems without the risk of those aforementioned “hallucinations.” As such, Foundry AIP has become highly sought after, particularly amongst American commercial enterprises. Last quarter, revenue from this sector surged by 121%, reaching $397 million, fuelled by both new and existing clients. The company’s “Bootcamp” sales model, wherein organizations are assisted in building AI-driven tools within a mere five days, has proven remarkably effective in attracting new business.
This is evidenced by a 45% increase in customer count, and existing clients are also expanding their use of Palantir’s services at a rapid pace. The total contract value for American commercial clients skyrocketed by 342% in the third quarter, and net revenue retention remains a robust 134%. Furthermore, the American government continues to be a strong supporter, driving a 52% increase in revenue to $486 million. International government revenue also experienced healthy growth, rising by 66% to $147 million.
A Prudent Assessment
AIP’s position as a potential operating system for artificial intelligence, coupled with the breadth of its applications, suggests that Palantir is well-positioned to benefit from the long-term growth of this technology. However, it is a truth universally acknowledged that a company trading at a forward price-to-sales multiple of 49 times and a forward price-to-earnings ratio of 126 times is, to put it mildly, expensive. Whether it can justify these multiples depends on its ability to sustain its current rate of growth. A prudent investor might, therefore, prefer to observe a slight retraction in the price before committing capital.
Even the most established companies – Nvidia, Alphabet, and Apple – have experienced periods of decline. Therefore, even if Palantir were to become one of the world’s largest companies, the path would likely be far from smooth. A discerning investor would, therefore, be well-advised to await a more favourable opportunity before venturing forth.
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2026-01-15 17:33