The ‘Seeing Stones’ of Wall Street: Palantir’s AI-Driven Year of Volatility and Growth
Unless you’ve been living under a rock for the past two years, you’ve likely heard about the rise of AI and its impact on the U.S. stock market. Whether or not we are currently witnessing an “AI bubble” is certainly up for discussion, but what isn’t is the volatility that AI has introduced to the market.
One company that has undoubtedly benefited from the AI “hype” is data analytics firm Palantir Technologies Inc. (NASDAQ: PLTR). Palantir was founded in 2003 by Alex Karp, Peter Thiel, Joe Lonsdale, Stephen Cohen and Nathan Gettings and was originally funded by the CIA’s venture capital arm, In-Q-Tel. (I didn’t even know the CIA had a venture capital arm!)
Palantir’s name is inspired by J.R.R. Tolkien’s “Lord of the Rings” series and comes from the ‘seeing stones’ called “Palantíri” — spherical, glass-like or translucent stone objects used for communication and intelligence gathering. (Full disclosure: I’ve never read “The Lord of the Rings,” but according to the fandom page, that’s the gist.)
Palantir’s founders set out to create data analytics and integration software solutions that enable organizations to better analyze, understand and manage large datasets. These five men believed that by developing this solution, they could truly harness the power of data and, in doing so, provide crucial insights to financial institutions, government agencies and other organizations.
The company’s two flagship platforms are Gotham and Foundry. Gotham is specifically designed for intelligence and government agencies, while Foundry was created for commercial clients. Over the years, Palantir has expanded its offerings and now serves a broader range of industries, including finance, manufacturing and healthcare. Additionally, its software has been used for counterterrorism purposes and to analyze financial data to identify investment opportunities.
Palantir is now regarded as one of the companies best equipped to spearhead the AI revolution alongside Nvidia Corporation, Taiwan Semiconductor Manufacturing Company and others. The question of whether Palantir can maintain its impressive growth rate remains.
In 2024, Palantir consistently delivered strong financials throughout the year, pushing the stock price up by a staggering 340%. The company saw significant growth across its core business sectors, especially in the U.S. In Q4, U.S. commercial revenue soared 64% year-over-year (YoY) and 20% quarter-over-quarter (QoQ) to $214 million, and U.S. government revenue increased 45% YoY and 7% QoQ to $343 million, showcasing Palantir’s ability to secure federal contracts. Total Q4 U.S. revenue climbed 52% YoY and 12% QoQ to $558 million, highlighting persistent domestic demand. Lastly, for the full year, U.S. revenue expanded 38% YoY to $1.9 billion, further reinforcing Palantir’s position as a dominant player in its largest market.
Additionally, in Q4, the company reported cash from operations of $460 million, achieving a 56% margin. Adjusted free cash flow totaled $517 million, reflecting a 63% margin. Palantir also reported a GAAP net income of $79 million in the fourth quarter, indicating a 10% profit margin.
It’s also impressive to look at the year as a whole. In addition to the Q4 results, the company also announced some of its full-year highlights. This included total revenue growing 29% year-over-year to $2.87 billion. Cash from operations of $1.15 billion, representing a 40% margin, and their adjusted free cash flow of $1.25 billion, representing a 44% margin.
As investors look to the future, it is important to consider all the risks and challenges that Palantir might face in the coming years. For starters, Palantir still relies heavily on U.S. government contracts. While this gives some stability, it also creates uncertainty because regulatory or political changes could impact financial performance. Another risk is increased competition in the AI and data analytics space. Competitors like Databricks, Microsoft, Amazon Web Services and Snowflake pose a threat. While Palantir has strong technology, these competitors could threaten its market share in the coming years. Another concern is AI regulation and the ethical concerns emerging around generative and other forms of AI.
Nonetheless, Palantir is still well-positioned to continue capitalizing on the growing AI and data analytics industry. Further expansion into the commercial markets with Foundry, international growth, and innovation with their AI solutions could help the company sustain its astronomical growth.
Will Palantir have another year like 2024? Unlikely. However, one thing is certain: Palantir is here to stay.
Photo Caption: Palantir Logo
Photo Credit: Wikimedia Commons
