The Underrated Data Analytics Giant

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What if I told you that one of the most important companies in data analytics is still flying under most investors’ radars? That’s Palantir a company that’s quietly transforming how governments and businesses handle data.

I’ve been following Palantir for a while now, and it’s fascinating to see how they’ve evolved from a secretive government contractor into a serious player in both the public and private sectors. We’re talking about a company that’s not just analyzing data—they’re empowering organizations to make real-time, game-changing decisions.

As the data analytics market gears up to $550 billion by 2028, Palantir is right at the center of it. But here's the thing: many people still don't fully grasp how much potential this company has. So, let’s dive into why I believe Palantir is one of the most underrated data giants in the market.

Background

If you’re not familiar with Palantir’s backstory, it’s pretty interesting. The company was founded in 2003 by Peter Thiel and a team of tech innovators, but today, it’s led by Alex Karp, a CEO with a unique vision for how data can reshape everything from national security to commercial industries. Karp has been a driving force in keeping Palantir at the cutting edge, especially when balancing its government roots with its push into the commercial space.

Palantir started out with a clear focus—using data to combat terrorism and help solve the biggest problems that governments were facing. But here’s where it gets really exciting. Over time, the company realized that the same tools they used for government work could be adapted for businesses, leading to the creation of Foundry for commercial clients and Gotham for government agencies.

Now, we’ll get into the details of Foundry and Gotham later, but to give you a quick snapshot: Foundry is helping some of the world’s largest companies make sense of their data, while Gotham remains Palantir’s backbone for government contracts, covering everything from counterterrorism to disaster response.

With this balance between commercial and government sectors, Palantir has positioned itself as a unique player in the market, offering solutions that cater to some of the most critical organizations on the planet.

Financial Overview

Now, let’s get into the numbers because Palantir’s financials are where you can see their potential. In Q2 2024, the company pulled in $678 million in total revenue, a solid 27% year-over-year increase. That kind of growth is what you want to see from a company positioning itself for long-term success.

Interestingly, Palantir is now splitting its revenue between government and commercial clients. The commercial side is catching up quickly. In Q2 alone, commercial revenue hit $307 million, up 33% year-over-year. U.S. commercial revenue grew by 55%, showing how well Palantir captures market share at home.

On the government side, Palantir brought in $371 million, a 23% increase from last year. Government contracts have always been Palantir’s bread and butter, and that steady growth gives them a reliable foundation while they push further into the commercial space.

But the real headline comes from their updated guidance for the full year 2024. Palantir is raising its total revenue guidance to between $2.742 billion and $2.750 billion, up from previous expectations. Their U.S. commercial revenue is also expected to grow by at least 47%, hitting over $672 million by the end of the year.

In addition, Palantir is boosting its adjusted income from operations guidance to between $966 million and $974 million, and they continue to expect adjusted free cash flow of $800 million to $1 billion.

With a net dollar retention rate of 114% this quarter—meaning existing customers are spending more—Palantir is not only bringing in new clients but also deepening relationships with the ones it already has.

Let’s not forget the big picture here. Palantir has steadily grown its revenue from $595 million in 2018 to over $2.2 billion in 2023. Now, with this updated 2024 guidance, we’re seeing just how far Palantir can go, especially as it continues to diversify its income streams between government and commercial contracts.

Core Products: Foundry & Gotham

Now, let’s discuss what makes Palantir stand out: its two core products, Foundry and Gotham. These platforms are the backbone of Palantir’s business and separate the company from other data analytics providers.

First up is Foundry, Palantir’s powerhouse in the commercial sector. If you’re a business trying to make sense of complex data—whether it’s customer behavior, supply chain logistics, or financial modeling—Foundry is the tool you need. It helps companies integrate and analyze all their data in real time. Foundry’s modular design lets companies customize it to their needs without a steep learning curve.

One of the best real-world examples comes from Tampa General Hospital. As one of the nation’s leading academic health systems, they’ve been using Foundry to build a connected health system that leverages AI to improve patient outcomes. The impact is impressive:

• 28% reduction in patient hold time in the Post-Anesthesia Care Unit (PACU)

• 30% improvement in nurse staffing ratios

• A PACU predictive model with 95% accuracy

• 83% reduction in time spent managing patient placements

Tampa General even created an application for real-time disaster response within 24 hours during Hurricane Ian, showcasing Foundry's speed and flexibility. Their teams have integrated nurse schedules, surgery schedules, and patient census data into the Foundry Ontology, allowing them to digitize staffing management and improve patient flow planning. What used to be a manual process is now AI-driven, allowing the hospital to plan staffing decisions days in advance.

And it’s not just healthcare. Energy giant BP is another commercial customer that has adopted Palantir Foundry to enhance decision-making and operational efficiency. BP uses Foundry to optimize everything from oil production to renewable energy projects, helping streamline their global operations and cut costs.

Then there’s Gotham, which has deep roots in the government sector. Initially designed for counterterrorism, Gotham was originally developed to assist U.S. intelligence agencies like the CIA and FBI in the wake of 9/11. The goal was to track terrorist activities by integrating and analyzing vast intelligence data across different agencies and platforms. Palantir’s Gotham platform became instrumental in identifying terrorist networks and predicting potential threats through its ability to handle enormous datasets and deliver actionable intelligence.

For example, Gotham was used to uncover terrorist financing networks, track terrorist communications, and map out connections between individuals across different geographic regions. By integrating various data sources like phone records, financial transactions, and social media activity, Gotham could piece together a full picture of potential threats that individual agencies couldn’t achieve alone. This allowed for faster, more accurate decisions on preventing attacks, which is still a critical function of Gotham today.

Beyond counterterrorism, the U.S. Air Force is using Gotham to track and manage fleet readiness, providing real-time insights into the status of their aircraft and ensuring mission readiness.

Additionally, Ukraine has been leveraging Palantir’s technology in its defense against Russia. The country uses Gotham for real-time data analysis on Russian ammunition movements and troop positioning. This has helped Ukraine track military logistics, defend key positions, and better allocate its resources during the ongoing conflict.

These examples show how Palantir’s platforms are not just tools for data analysis; they’re transforming entire industries and governments. Foundry and Gotham empower organizations to turn massive, complex data sets into actionable insights, whether improving patient care, preventing terrorist attacks, or defending a country.

Thesis

Palantir’s real advantage lies in its moat—its software solutions are in a league of their own. While many companies are exploring AI and Big Data, Palantir has already proven they provide unmatched value. Their platforms, Foundry and Gotham, are deeply embedded in the most critical operations for governments and Fortune 500 companies alike. This isn't just about data analytics—it’s about making real-time, AI-driven decisions that impact everything from national security to corporate strategy.

As the future of AI advances, particularly with large language models (LLMs), Palantir is leading the charge. They’re one of the few companies that can seamlessly combine cutting-edge AI with vast data integration. This isn’t an experiment for them—they’re already proving their dominance in this space.

No other company can deliver the end-to-end solutions that Palantir does, making them the go-to provider for organizations that need true, scalable value. In a world driven by data, Palantir is showing that they’re not just the best. They’re the only ones who can do what they do.

Leadership

Regarding leadership, Palantir has two standout figures who have shaped its vision and direction: Peter Thiel and Alex Karp. Peter Thiel, one of the original members of the PayPal Mafia, is one of my favorite people in the business world. His approach to investing and entrepreneurship is unmatched. Thiel’s ability to back visionary projects like Palantir from the early stages has proven his knack for identifying disruptive technologies. His deep belief in the power of data to shape the future has set Palantir on the course to becoming the data powerhouse it is today.

Then there’s Alex Karp, Palantir’s CEO, who has been the driving force behind the company’s innovative approach. Karp’s leadership has taken Palantir from a niche government contractor to a major player in the commercial and AI space. Together, Thiel and Karp have built a company that’s not just ahead of the curve but one that’s truly changing how the world leverages data.

Risks of Investing

While Palantir presents an exciting growth story, there are some risks investors should be aware of. Government dependence remains a key concern, as a significant portion of Palantir’s revenue still comes from government contracts. Any changes in government budgets or priorities could impact their financials.

Additionally, Palantir has yet to reach GAAP profitability, which raises questions about its long-term financial stability, especially given its high stock-based compensation. This could dilute shareholder value over time if not properly managed.

There’s also the matter of competition. While Palantir has a moat, larger tech companies like Google, Amazon, and Microsoft are all expanding their AI and data analytics capabilities. Though Palantir has carved out a unique space, the competitive pressure is always there.

Finally, valuation is a concern. Palantir’s stock has historically been priced at a premium, and while its growth potential is significant, the stock may be vulnerable to market volatility if investors start to demand profitability sooner rather than later.

Conclusion

Palantir is more than just a data analytics company—it’s a pioneer in applying AI and Big Data in the real world. Palantir's platforms are driving significant change, from improving healthcare efficiency at Tampa General Hospital to enabling strategic military decisions for the U.S. and Ukraine. Their ability to integrate AI into government and commercial sectors is a testament to their innovation and leadership.

As the demand for real-time, data-driven decisions continues to grow, Palantir is positioned as a participant and a leader in the future of AI and Big Data. With their technology acting as a moat, they’ve proven they provide unparalleled value to their clients, from governments to major corporations. If you’re looking for a company ahead of the curve and poised to lead the next wave of technological innovation, Palantir should be on your radar.

Talk to you on Sunday!

Cheers,

The Bean Team

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