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    Palantir Technologies Inc (PLTR)

    Business Description

    Palantir Technologies Inc. builds software platforms that empower organizations to integrate their data, decisions, and operations at scale. The company offers four principal software platforms: Palantir Gotham, Palantir Foundry, Palantir Apollo, and Palantir Artificial Intelligence Platform (AIP) . Palantir's revenue is generated from contracts with customers who pay to use these software platforms, with contract terms typically ranging from one to five years . The company operates in two segments: commercial and government, with significant contributions from both sectors .

    1. Palantir Gotham - Used by defense agencies and the intelligence community for data integration and analysis.
    2. Palantir Foundry - Serves as a central operating system for various industries, enabling data-driven decision-making.
    3. Palantir Apollo - A cloud-agnostic platform that ensures continuous operation of critical systems by coordinating updates and configurations.
    4. Palantir Artificial Intelligence Platform (AIP) - Leverages machine learning technologies and large language models to enhance data connectivity and decision-making processes within enterprises.

    Q3 2024 Summary

    Initial Price$25.48July 1, 2024
    Final Price$36.46October 1, 2024
    Price Change$10.98
    % Change+43.09%

    What went well

    • Palantir is rapidly converting customer engagements into significant contracts, with customers going from initial boot camps to 7-figure ACV deals in less than two months.
    • The company is experiencing robust growth in the U.S., with 44% year-over-year growth overall and 54% in U.S. commercial, reflecting strong demand for its AI products.
    • Palantir's ability to scale its products efficiently using AI and large language models allows them to serve more clients without increasing headcount, enhancing operational leverage and margins.

    What went wrong

    • Strategic commercial contracts are now a tiny part of Palantir's business, accounting for only 1% of revenue in Q3, and the program ended 3 years ago, potentially limiting future growth in this area .
    • Palantir previously faced perception challenges in its U.S. government business, including concerns that it 'wins too much,' necessitating a strategy shift to open up its products to partners, which could affect its competitive edge and profit margins .
    • Growth appears concentrated in the U.S., with executives noting rapid expansion is 'especially in the U.S.,' potentially indicating limited international growth and overreliance on a single market .

    Q&A Summary

    1. U.S. Commercial Growth
      Q: Surprised by quick boot camp conversions to mega deals?
      A: Management reported impressive 44% year-over-year growth in U.S. business and 54% growth in U.S. commercial sector. Customers are rapidly moving from boot camps to seven-figure annual contract value deals within less than two months , highlighting the effectiveness of Palantir's process and strong position in the AI revolution.

    2. U.S. Government Partnerships
      Q: What's driving the 40% increase in U.S. government revenue and new partnerships?
      A: The acceleration in U.S. government revenue, up approximately 40% , is driven by the Mission Manager platform, utilizing software infrastructure like Rubix and Apollo to help partners reach revenue faster. By opening parts of their products to partners and allowing them to work directly with government data, Palantir has reduced friction and boosted collaboration.

    3. Strategic Commercial Contracts
      Q: Update on strategic commercial contracts and deal value?
      A: Strategic commercial contracts now represent a tiny part of the business, about 1% of revenue in Q3. The program ended three years ago, making it largely irrelevant to current operations.

    4. Support for Individual Investors
      Q: Any message for individual investors?
      A: CEO Alex Karp expressed gratitude, emphasizing that they are "in it together" and that individual investors' support is crucial to Palantir's success.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDQ3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Government289.07301.505307.6324.021,222.2335.4370.767408.3
    Commercial236.12231.812250.6284.271,002.8299.0307.367317.2
    Total Revenue525.19533.317558.2608.292,225.0634.3678.134725.5
    Revenue by Geography - in Millions of USDQ3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States336.8328.012345.5367.941,378.247406.389437.189499.0
    United Kingdom49.663.22964.458.03235.257-76.99169.5
    France--------
    Rest of World138.8142.076148.3182.33611.508227.949163.954157.0
    Total Revenue525.2533.317558.2608.32,225.012634.338678.134725.5
    KPIs - Metric (in billions)Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Remaining Deal Value with Commercial Customers$2.1$2.1$2.1$2.1----
    Remaining Deal Value with Government Customers$1.8$1.8$1.8$1.8----

    Executive Team

    NamePositionStart DateShort Bio
    Alexander KarpChief Executive Officer (CEO)2003Alexander Karp is a co-founder of Palantir Technologies Inc. and has served as the company's CEO since its inception. He holds a B.A. from Haverford College, a J.D. from Stanford Law School, and a Ph.D. from Goethe University in Frankfurt, Germany. He was selected to serve on the Board of Directors due to his perspective and experience as the CEO and as one of the co-founders of Palantir .
    Stephen CohenCo-Founder, President, Secretary, and Director2005Stephen Cohen is a Co-Founder, President, Secretary, and Director at Palantir Technologies. He holds a B.S. in Computer Science from Stanford University. He has been a member of Palantir's Board of Directors since 2005 and was selected for his role due to the perspective and experience he brings as an officer and co-founder of the company .
    Shyam SankarChief Technology Officer (CTO) and Executive Vice President2006Shyam Sankar is the Chief Technology Officer (CTO) and Executive Vice President at Palantir Technologies Inc. He holds a B.S. in Electrical and Computer Engineering from Cornell University and a M.S. in Management Science and Engineering from Stanford University .
    David GlazerChief Financial Officer and Treasurer2013David Glazer serves as the Chief Financial Officer and Treasurer at Palantir Technologies Inc. He holds a B.A. in History from Santa Clara University and a J.D. from Emory University School of Law .
    Ryan TaylorChief Revenue Officer and Chief Legal Officer2010Ryan Taylor serves as the Chief Revenue Officer and Chief Legal Officer at Palantir Technologies Inc. He holds a B.S. in Computer Science and an M.S. in Management Science & Engineering from Stanford University, as well as a J.D. from Harvard Law School .

    Questions to Ask Management

    1. With your U.S. business growing at 44% and maintaining a Rule of 68, which you state is among the best, why not consider lowering margins to expand your client base and accelerate growth even further, especially when focusing on a smaller number of dominating partners may limit overall market penetration?

    2. Despite a 13% year-over-year growth, international government revenue declined 5% sequentially; what factors contributed to this decline, and what strategies are you implementing to address challenges in the international government segment?

    3. Given that revenue from strategic commercial contracts is expected to decline to between $6 million and $7.5 million in Q4 2024 from $20 million in Q4 2023, how significant is the impact on overall revenue, and what measures are you taking to mitigate this anticipated reduction?

    4. With adjusted expenses increasing by 6% sequentially and 14% year-over-year due to investments in AIP and technical talent, how do you balance the need for continued investment in AI capabilities with maintaining profitability and operating margins?

    5. As you focus on a smaller number of the world's best partners dominating with your product, rather than expanding to a larger client base, how do you mitigate risks associated with revenue concentration, especially if one of these key clients reduces their spending or switches to a competitor?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateAugust 2023
    End Date/DurationNo expiration date
    Total additional amount$1.0 billion
    Remaining authorization$954.4 million
    DetailsThe program may be discontinued at any time and aims to enhance shareholder value through various repurchase methods.

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2024
    • Guidance:
      • Q4 2024 Revenue: $767 million to $771 million .
      • Q4 2024 Adjusted Income from Operations: $298 million to $302 million .
      • Full Year 2024 Revenue: $2.805 billion to $2.809 billion .
      • Full Year 2024 U.S. Commercial Revenue: In excess of $687 million, growth rate of at least 50% .
      • Full Year 2024 Adjusted Income from Operations: $1.054 billion to $1.058 billion .
      • Full Year 2024 Adjusted Free Cash Flow: In excess of $1 billion .
      • Full Year 2024 GAAP Operating Income and Net Income: Expected in each quarter .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024 and FY 2024
    • Guidance:
      • Q3 2024 Revenue: $697 million to $701 million .
      • Q3 2024 Adjusted Income from Operations: $233 million to $237 million .
      • Full Year 2024 Revenue: $2.742 billion to $2.750 billion .
      • Full Year 2024 U.S. Commercial Revenue: In excess of $672 million, growth rate of at least 47% .
      • Full Year 2024 Adjusted Income from Operations: $966 million to $974 million .
      • Full Year 2024 Adjusted Free Cash Flow: $800 million to $1 billion .
      • Full Year 2024 GAAP Operating Income and Net Income: Expected in each quarter .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024 and FY 2024
    • Guidance:
      • Q2 2024 Revenue: $649 million to $653 million .
      • Q2 2024 Adjusted Income from Operations: $209 million to $213 million .
      • Full Year 2024 Revenue: $2.677 billion to $2.689 billion .
      • Full Year 2024 U.S. Commercial Revenue: In excess of $661 million, growth rate of at least 45% .
      • Full Year 2024 Adjusted Income from Operations: $868 million to $880 million .
      • Full Year 2024 Adjusted Free Cash Flow: $800 million to $1 billion .
      • Full Year 2024 GAAP Operating Income and Net Income: Expected in each quarter .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q1 2024 and FY 2024
    • Guidance:
      • Q1 2024 Revenue: $612 million to $616 million .
      • Q1 2024 Adjusted Income from Operations: $196 million to $200 million .
      • Full Year 2024 Revenue: $2.652 billion to $2.668 billion .
      • Full Year 2024 U.S. Commercial Revenue: In excess of $640 million, growth rate of at least 40% .
      • Full Year 2024 Adjusted Income from Operations: $834 million to $850 million .
      • Full Year 2024 Adjusted Free Cash Flow: $800 million to $1 billion .
      • Full Year 2024 GAAP Operating Income and Net Income: Expected in each quarter .