Source: Company Financials, Leverage Shares analysis

The average revenue from top customers continues to grow in an orderly fashion, which indicates a deepening of engagement and positively biases future revenues from legacy clients. While the company has continued to attract commercial clients and has been banking higher billings, the public sector looms large in the overall picture. Relative to FY 2021, revenues originating from the government increased a little over 7% to 51%.

The “AI solutions” market will also be one marked with high “adhesion”. This is due to the fact that most of these solutions aren’t really the “plug-and-play” type; comprehensive inference-framing drives the quality of the solution being provided. Palantir is likely to have a ready pipeline of government projects due to its lineage. Generally, governments tend to be generous yet exacting customers once an agreement is made.

In Conclusion

Given that a monopoly on achieving a specific result via the application of a specific technique isn’t a given, a choice to invest in Palantir on the back of strong commercial volumes must always come with the forewarning that it’ll likely be a buyer’s market in the private sector as the likes of Alphabet and Amazon get more involved in the “AI solutions” space that is so comprehensively dominated by the likes of Microsoft over the past year or so. Over on the public sector side, the company doesn’t exactly shy away from its involvement with U.S.-centric geopolitics both off and on the battlefield. For instance, the company has been credited as a key component² of Ukraine’s war machine in its current conflict with the Russian Federation.

AI applications in the battlefield are a paradigm shift in modern warfare; it’s entirely probable that one day, after the matter is weighed and discussed, such AI will be considered the equivalent of a weapon. If so, companies that mostly provide such solutions might be added to Exclusionary Lists³ such as “Controversial Weapons” that are used during the construction of investment vehicles. As of 2023, over 50% of European and US funds applied exclusionary lists to screen out weapons companies. If the company’s “non-peaceful” applications’ contribution to its revenue streams were substantial enough to make it fit for exclusion, that could significantly shrink the company’s accessible investor pool – a scenario that its leadership likely wishes to avoid.

All said and done, it is clear that the company has an “adhesive” pipeline of clients in both public and private sectors. Given its products’ reported success in delivering effective battlefield solutions (and possibly also in more covert fields such as surveillance and espionage), its public sector pipeline will likely continue to grow. Whether it manages to maintain a similar degree of success in the private sector, of course, remains to be seen as the “AI race” heats up.

Footnotes:

1. “How Team of Geeks Cracked Spy Trade”, 4 September 2009, Wall Street Journal
2. “How Palantir Is Shaping the Future of Warfare”, 10 July 2023, TIME Magazine
3. “How to Exclude Weapons from Your Portfolio”, 24 February 2023, Morningstar