March 5, 2025
What is Palantir?
Palantir lists the Australian, US, UK, Canadian, French and German Governments as some of its customers. As the only data software of its kind, let’s take a look at what sets Palantir apart and whether its high valuation is justified.
Scan this article:
Financially backed by the Central Intelligence Agency (CIA), co-founded by one of PayPal’s founders and with a client list of multiple Government organisations worldwide, Palantir is a story investors should know of.
Let’s take a deep dive into one of the world’s most secretive and highly confidential companies.
What is Palantir Technologies?
Founded in 2003 with nearly US$2 million in funding from the CIA, Palantir is the brainchild of PayPal co-founder Peter Thiel and his Stanford Law classmate Alex Karp.
Back in his PayPal days, Peter came across significant issues with fraudulent activities accounting for over 1% of the company's total volume. To combat this, Peter and his team at PayPal developed advanced fraud detection tools. This experience led Peter to realise that software capable of identifying hidden patterns in vast amounts of data could be used for more than just detecting fraud – it could also help combat terrorism and security threats.
After selling his stake in PayPal, Peter reached out to his Stanford Law classmate Alex Karp (now Palantir's CEO) to start a company that would revolutionise data analysis. The result was Palantir, a company built to equip governments and businesses with the tools to analyse and understand complex data like never before.
Fun Fact
“Palantir” comes from J.R.R. Tolkien’s Lord of the Rings. In the books, Palantíri are magical seeing stones that provide vision across vast distances – just like Palantir’s real world data analytics tools.
What does Palantir do?
First things first – any company so closely tied with multiple government organisations isn’t going to share too much about what they do.
But based on publicly available information, Palantir – in the simplest terms – takes mountains of data, uses it to uncover any hidden patterns and then uses AI to help the humans make decisions.
Let’s dive into Palantir’s key products.
How does Palantir Gotham work?
Born from the needs of intelligence and defense agencies, Gotham is Palantir's first ever and flagship platform. It's built to sift through oceans of disparate data, connect seemingly unrelated dots and predict threats. Think of it as the ultimate "connect the dots" tool for national security.
Fun Fact
Bernie Madoff orchestrated the world’s largest Ponzi scheme, defrauding investors of an estimated US$65 billion. Osama bin Laden led Al Qaeda, one of the most infamous terrorist organizations in history. What do these two figures have in common – aside from their notoriety? Palantir was rumoured to have played a role in bringing both to justice.
How does Palantir Foundry work?
Foundry brings Gotham's data-crunching power to the commercial sector. It transforms raw data into actionable insights for businesses across industries. This represents Palantir's effort to diversify its revenue streams and prove that its technology can be as valuable to a Fortune 500 company as it is to the CIA.
How does Palantir AIP work?
As mentioned, Palantir is also about applying AI to and automate decision making.
Palantir’s Artificial Intelligence Platform (AIP) is the engine that drives this, using machine learning algorithms to identify patterns, predict outcomes and recommend actions.
But AIP isn't a black box – it's designed to work in conjunction with human analysts, augmenting their capabilities and ensuring that decisions are aligned with strategic goals. AIP has been proven to bring benefits such as cost savings to businesses.
How does Palantir Apollo work?
Palantir understands that software is never truly "finished." That's why it developed Apollo, a continuous delivery system that allows it to deploy new features and updates to its platforms.
Apollo allows Palantir to do this without disrupting operations. This speed is crucial in today's rapidly evolving tech landscape and allows Palantir to stay ahead of the curve.
What makes Palantir different?
But hmm… isn’t the market flooded with data software? What makes Palantir special?
Only custom builds that go a step further
Imagine traditional data analytics software as a home built by a project builder – functional and beautiful but not exactly made to perfectly suit unique needs.
In contrast, Palantir constructs a custom data fortress tailored to address each client's challenges and navigate their specific data landscape.
And where many data analytics tools excel at generating reports and visualisations, Palantir goes further by giving actionable steps. Gotham and Foundry are not just about seeing the data – they are about acting on it, providing the tools to identify threats and opportunities and to orchestrate responses in real-time.
“We built Foundry, which was used to distribute the COVID vaccine and save millions of lives. We built the digital kill chain. They're category defining products.”
- Alex Karp, Palantir CEO, Davos 2023: A conversation with Palantir's Alex Karp.
Unique, vertically integrated business model
But perhaps what makes Palantir truly special is that there currently aren’t any companies that offer its entire suite of products.
Yes, there are companies that offer components of Palantir's products – data integration tools, AI platforms, visualisation software – and they face competition in different aspects of their business, but presently, there aren’t many that can match their full suite of end-to-end capabilities.
“Competition is for losers. If you want to create and capture lasting value, look to build a monopoly.”
- Peter Thiel, Palantir Co-Founder, Peter Thiel's 2014 book "Zero to One".
Palantir's business model isn't about selling individual products – it's about offering a comprehensive suite of capabilities that can completely transform organisations.
Finally, Palantir benefits from a powerful network effect. As more organisations adopt its platforms, the company gains access to a broader range of data, which in turn enhances the accuracy and effectiveness of its analytics. This creates a virtuous cycle, making it increasingly difficult for competitors to catch up.
How Palantir’s numbers look
So while we now know how impressive Palantir’s business model is, do its numbers stack up? Here are some key figures:
- Strong revenue growth: Palantir boasts a revenue compound annual growth rate of 31% over the last five years.
- Large gross profit margin: Like many software companies, Palantir boasts a high gross profit margin at 80% for 2024.
- Growing net income: Despite its long history, Palantir only began recording net income in 2023. Despite that, it more than doubled profits year-on-year from 2023 to 2024.
- Highly robust balance sheet: As at the end of 2024, Palantir carried a cash balance of US$2.1B – nearly double its total liabilities US$1.25B. Palantir does not carry any long-term debt and nearly half of its total liabilities is constituted of unearned revenues.
Yup, Palantir has recorded strong growth in both revenues and income, and its balance sheet is nothing short of impressive.
Despite that, let’s take a look at some of the company’s risk factors.
Palantir is expensive
As of 26 February, Palantir trades at around US$90 after having gained 284% over the last year. This signifies:
- EV/NTM* Revenue Ratio: ~54x
- Price/NTM Earnings Ratio: ~183x
- Price/Book Ratio: ~43x
These valuation metrics are significantly higher than the software sector medians suggesting the market is expecting substantial future growth and margin expansion.
*NTM stands for “next twelve months” and uses the consensus analyst forecasts for revenue and earnings numbers.
Emergence of competitors
While Palantir enjoys the benefits of its unique comprehensive suite of software, both corporations and governments are now trying to build a rival.
The French Government for example has used Palantir’s software for many years but began to search for a French alternative. Last year, a company dubbed as “Europe’s Palantir” began making headlines. While not quite at Palantir’s level just yet, it may get there someday.
Regulations, Politics and Reputation
On one hand, Palantir’s government contracts provide a stable and recurring revenue stream as well as a strong validation of Palantir's technology.
But on the other hand, government budgets are subject to political pressures and shifting priorities, which could impact Palantir's future revenue.
Similarly, Palantir has faced lots of scrutiny for allowing its technology to be used in geopolitical issues. Some of Palantir’s customers include the CIA, FBI, the Marine Corps and the Air Force, all of which are involved in warfare.
So knowing all that, do you believe that Palantir will grow enough to justify its valuation?
What’s Next for Palantir?
Looking ahead, Palantir is poised to continue expanding its reach. The company’s technology remains essential for national security agencies, but it is increasingly proving valuable in the private sector as well. Its growing commercial portfolio could be key to sustaining its long term growth.
The company has a track record of adapting to technological trends, including AI and continuous software updates via Apollo. With an eye on the future, Palantir will likely continue to shape the landscape of big data and analytics.
Knowing all that, do you believe that Palantir will grow enough to justify its valuation?
Bonus section: Palantir didn’t go through an IPO
Interestingly, Palantir took an unconventional route to becoming a publicly traded company.
Instead of pursuing a traditional initial public offering (IPO), Palantir opted for a direct listing when it debuted on the New York Stock Exchange on September 30, 2020.
How a direct listing works
In contrast to an IPO, the company doesn't create new shares or raise capital through the listing process. Existing shares held by insiders, employees and early investors instead become immediately eligible for public trading.
Why would Palantir do that?
Well firstly, Palantir didn’t exactly need the funds from an IPO. The company decided to go public to build reputation and get its name known.
Additionally, opting for a direct listing means Palantir can bypass traditional IPO underwriters and potentially save on fees.
Palantir's direct listing resulted in a valuation of approximately US$21 billion on its first day of trading. The stock closed at US$9.50 per share, 31% higher than the reference price of US$7.25 set by the NYSE.
Note: Late last year, Palantir transferred from the NYSE to the Nasdaq.
As always, it is essential to conduct your own research and due diligence before making any investment decisions. Superhero does not provide financial advice that considers your personal objectives, financial situation or particular needs. All investments carry risk so please consider carefully before investing. Remember that past performance is not indicative of future performance. Graphics, charts and graphs provided for illustrative purposes only.
Become a part of
our investor community
Why you should join us:
- Join free and invest with no monthly account fees.
- Fund your account in real time with PayID.
- Get investing with brokerage from $2. Other fees may apply for U.S. shares.
Read our latest articles
Make knowledge your superpower and up your skills and know-how with our news, educational tools and resources.
