🕵️ Palantir: The AI Power Play
How this stock more than tripled in 2024
Welcome to the Premium edition of How They Make Money.
Over 160,000 subscribers turn to us for business and investment insights.
In case you missed it:
Palantir CEO Alex Karp opened last week’s earnings call on a lighthearted note:
“Given how strong our results are, I almost feel like we should just go home.”
With shares surging over 23% in a single day, investors seemed to agree.
Last year, we explored Palantir’s story and leadership. At the time, we highlighted the potential of its Artificial Intelligence Platform (AIP) and the role of boot camps in accelerating commercial revenue growth. The premise was simple: Palantir helps its customers move from prototype to production faster, driving demand for its commercial products.
Here’s what we concluded a year ago:
“If AIP lives up to its potential, Palantir's financial performance could dramatically improve in the coming years. By harnessing network effects to drive new contracts and leveraging operational efficiencies for more software-like margins, the next few quarters are poised to reveal some significant insights. One thing is clear: this leadership team thinks the future looks bright.”
Since then, the stock has tripled. So, it’s time to revisit the story:
Why has Palantir’s stock risen over 250% this year?
Is the valuation sustainable?
Today at a glance:
Palantir Q3 FY24.
Recent business highlights.
Key quotes from the earnings call.
What to watch looking forward.
Disclosure: Palantir has been a holding in App Economy Portfolio since January 2024. I’ve added to my position multiple times this year, most recently in October.
For an explainer on metrics like net dollar retention, check out our article on the 7 traits to watch in cloud stocks.
1. Palantir Q3 FY24
Key metrics to watch:
Billings: Total customer invoices during the quarter, reflecting near-term revenue growth and demand.
Remaining Performance Obligations (RPO): Future revenue commitments from commercial contracts, a leading growth indicator. Government contracts typically have termination for convenience clauses that exclude them from the RPO scope.
Net Dollar Retention: A measure of revenue growth from existing customers, excluding new accounts. For Palantir, this metric surged thanks to strong AI adoption. However, it’s a lagging indicator using the trailing 12 months.
Let’s visualize the most recent trends.