About the company
Palantir Technologies is a software company that specializes in data analysis and intelligence solutions for government, military, and intelligence agencies, as well as for commercial enterprises. Palantir’s software platforms, including Gotham, Apollo, and Foundry, are used to analyze large and complex datasets to derive insights and support decision-making. Palantir Technologies Inc. was incorporated in 2003 and is based in Denver, Colorado.
Gotham: Gotham is Palantir’s flagship software platform, which is designed for use by intelligence and law enforcement agencies. It provides tools for data integration, analysis, and visualization, allowing users to process and analyze vast amounts of data from multiple sources, such as structured and unstructured data, social media, financial transactions, and more. Gotham is known for its ability to handle data with different levels of classification and security, making it suitable for handling sensitive information counterterrorism activities.
Apollo: Apollo is Palantir’s platform for building and deploying data-driven applications. It allows users to create custom applications on top of Palantir’s core data analysis capabilities. Apollo provides tools for data modeling, application development, and deployment, enabling organizations to build and deploy their own data-driven solutions tailored to their specific needs. Apollo is often used by organizations to create custom applications for operational planning, risk assessment, supply chain management, and other use cases.
Foundry: Foundry is Palantir’s data integration and analysis platform for commercial enterprises. It provides tools for data integration, data management, and data analysis, allowing organizations to bring together data from different sources, clean and structure it, and gain insights from it. Foundry is widely used in industries such as finance, healthcare, energy, and logistics to analyze data and make data-driven decisions.
Overall, Palantir’s software platforms, including Gotham, Apollo, and Foundry, provide powerful capabilities for data integration, analysis, and visualization, enabling organizations to process and analyze large and complex datasets to derive insights and support decision-making across various domains, from intelligence and law enforcement to commercial applications.
Industry
The market for insight engines is projected to reach USD 5.6 billion by 2028, at a CAGR of 27.1% during the forecast period.
Key market players
While there is no out and out competitor for Palantir, following are the few key market players in the data analytics industry:
Business model
Palantir’s business model typically involves working with companies in a phased approach.
During the “acquire” phase, Palantir sends forward deploy engineers to customize their platform, Foundry, to suit BP’s specific needs, which may take around a year. Palantir covers the setup costs during this phase, which can impact their near-term margins and cash flow. Palantir charges subscription fees for their software, which provides a scalable revenue stream once the tailored program is launched and running.
However, in order to move to the “expand” phase, the customer needs to generate more than $100k in revenue, which helps Palantir convert their negative contribution margin to a positive one. During the “scale” phase, Palantir aims to improve their margins as they no longer have costs associated with tailoring the product while the customer’s revenue grows exponentially. This allows Palantir to generate positive cash flow and potentially achieve higher profitability, making their business model more sustainable in the long term.
Revenue
Palantir experienced a significant growth in revenue from FY21 to FY22, with a 24% increase resulting in $1.9 billion in total revenue. The majority of the revenue was generated from government customers (56%) while commercial customers accounted for 44%. In terms of geographic distribution, 61% of revenue came from US customers and 39% from Non-US customers in FY22.
Palantir is expected to continue its growth trend in FY23, with projected revenue of $2.2 billion at a growth rate of 16%. This is indicative of a positive outlook for the company. Additionally, Palantir has increased its customer base from 237 in FY21 to 367 in FY22, demonstrating its ability to expand its market reach. The average revenue generated from the top 20 customers also increased by 13%, from $43.6 million in FY21 to $49.4 million in FY22, indicating that the company’s relationship with its customers is sustainable and growing.
GPM
Palantir reported a gross profit of $1.5 billion in FY22 and $1.2 billion in FY21, with a gross profit margin (GPM) of 79% and 78%, respectively.
Palantir’s unique business model involves heavy investment in the initial phase of customer acquisition, which can lead to a good quarter in terms of customer growth resulting in a bad quarter for Wall Street. However, Palantir claims to have improved the speed at which their platforms can be deployed, which can eventually lead to an increase in GPM.
Overall, Palantir’s financial report suggests that they are taking steps to improve their profitability and efficiency in delivering their products and services to customers. The high GPM demonstrates that Palantir is able to generate significant revenue from its sales, and their efforts to increase platform deployment speed may lead to further growth and profitability in the future.
Earnings
While a decrease in research and development (R&D) costs may be seen as a negative indicator for some companies, it is important to note that it depends on the specific circumstances of the company. In some cases, a decrease in R&D costs may indicate that a company has shifted its focus away from developing new products, which could negatively impact their long-term profitability. However, in other cases, a decrease in R&D costs may indicate that a company has already developed its core products and is now focusing on improving their profitability and efficiency.
Regarding Palantir’s financial performance, it is notable that their loss from operations decreased significantly from ($1.17) billion in FY20 to ($0.16) billion in FY22. This suggests that the company has made progress in improving its financial performance and may be moving closer to profitability.
Moreover, the management claims to be GAAP net profitable in FY23, which suggests that they anticipate continued improvements in their financial performance. However, it is important to keep in mind that these claims are based on projections and may be subject to change. Overall, these metrics indicate that Palantir is taking steps towards achieving profitability and improving its financial performance.
Cash flow
Palantir currently has ~$2.6 billion in cash and equivalents which could potentially lead to an increase in interest income in FY23.
Opinion
While Palantir has a strong presence in the government sector, a dip in total remaining revenue contracts from commercial customers suggests that the company needs to focus on acquiring more commercial clients to continue its growth.
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