They are the tech company that beat out Lockheed Martin, BAE Systems, and 14 other unique systems to snatch an NSA contract to provide data analytics to the Five Eyes Alliance in 2011. Palantir has never looked back.
This could become the next 10-bagger.
It’s been that type of overperformance for Palantir since its inception in 2003.
By 2009, they had already amassed over $1.2 billion worth of government contracts and Palantir has already gone through 18 years of product development and spent more than $3 billion on R&D.
Palantir has an unswerving mandate to serve the U.S. government and its allies which has been an effective way to market its services.
This narrow message has effectively knocked out competition from Microsoft, Google, Facebook, Amazon, and Apple who have taken a “friends with everyone but friends with no one” approach to their business empires.
Their companies’ employees have protested against any type of government work with the U.S. army, withering at the thought that they would be responsible for blood on their hands.
Palantir makes sure that prospective employees understand where revenue is procured from and make no apologies for it.
Summing up Palantir is hard to do, but they really are the swiss army knife of data analytics that provide a platform in order to carry out executive decisions that put together trillions of data points from public, private, and secret sources into an easy to use, integrated, one-stop shop system.
This has worked wonders for the U.S. defense agencies and why CEO Alex Carp doubled down with Palantir’s five-year outlook of greater than $4 billion in revenue in 2025.
Starting in 2021, Palantir expects greater than 30% annual revenue growth each year for the next five years.
And in Q1 of this year, Palantir expects revenue growth of 45% or $332 million.
The strong outlook fuses with a sensational full-year 2020 performance of $1.93 billion in revenue, up 47% year over year. Fourth-quarter revenue was $322 million, up 40% year over year, and roughly $21 million above a prior guidance range.
Government revenue accelerated in the fourth quarter growing 85% year over year to $190 million.
Palantir signed several large deals in the quarter including a three-year $44 million expansion with the U.S. Food and Drug Administration and a two-year $31 million agreement with the NHS.
Some of the other deals signed were a multi-year contract with Pacific Gas and Electric to help it streamline operations across the company.
PG&E will now be able to perform root cause analysis and upgrade monitoring.
This should improve PG&Es electric operations and asset management, resulting in enhanced safety and grid reliability.
Palantir has deepened a partnership with BP. And in the fourth quarter, they signed a five-year nine-figure enterprise renewal and have an ongoing relationship with BP since 2014.
The largest part of Palantir’s annual revenue comes from the U.S. military with full-year government revenue rising 77% to $610 million, led by ongoing momentum in the U.S., which grew 91%.
Its Army operation continues to expand.
Palantir recently won a pair of new contracts with the Army to accelerate its modernization efforts.
Palantir was also the beneficiary of the U.S. Army executing its first option year with approximately $114 million as part of a partnership on the Army Vantage program.
Under the $8.5 million Phase 1 contract, Palantir will collaborate with the Army to demonstrate a solution that integrates space, high altitude, aerial, and terrestrial sensors for use in intelligence command and control.
In November 2020, Palantir was selected to provide a prototype for the Army's common data fabric and data security solutions.
Palantir provides an integrated solution that will ultimately improve access to critical data for commanders and soldiers, deliver efficient use of networks and denied integrated environments, and increase the collaboration with joint and allied partners.
The strength isn’t just relegating to U.S. government contracts, Palantir is experiencing intensive growth of existing customers with average revenue per customer growing 41% to $7.9 million.
They grew the number of accounts with $10 million of annual revenue or more by 50%.
For the full year 2020, 43% of Palantir’s revenue was generated from new customers in 2018 or later symbolizing their improving ability to rapidly onboard customers.
Palantir is also just scratching the surface of their commercial business heading into 2021 that saw a revenue rise of 107% year over year in fiscal 2020.
Growth tech firms typically preside over a margin problem at this early stage but Palantir exhibits some of the best margins around with full-year adjusted gross margin of 81%, up 1,000 basis points, compared with full-year 2019.
The year-over-year improvement in gross margin was driven by increased automation and efficiency in the delivery of our software.
Palantir is at the cutting edge of data analytics and whether it’s helping Fortune 500 companies navigate climate change headwinds, implementing Brexit policies for British companies, or modernizing U.S. military operations, they have seized the highest quality revenue possible.
The data analytic company is certainly a play on cyber espionage that is poised to explode on the sovereign and economic level as adversaries have bold plans to weaponize 5G.
One pain point is the overreliance of government contracts; however, I would argue that they are scratching the surface with the commercial operations and the path of least resistance for commercial revenue is up.
The pathway to grow from today’s $38 billion to $200 billion is wide open and if Palantir deploys their best of breed management to grow revenue 30% for the next 5 years, this is easily a $100 stock in the next 2 years.
