Palantir (PLTR -0.74%) has long been a stock that has polarized investors, thanks both to the somewhat opaque nature of its business of providing software to government and intelligence agencies, and because of the profiles of its outspoken and highly visible co-founders Peter Thiel and Alex Karp. After the mercurial company reported earnings this morning, it appears that the market is decidedly less enthusiastic about it. Shares have been falling sharply since the company reported a slight loss instead of the earnings which the market was expecting, and reduced its full-year revenue guidance from $1.98 billion to $1.9 billion.

But the long-term picture for Palantir remains very intriguing, and this short-term pullback in a fickle market presents an opportunity for long-term investors to start positions in this dynamic company. Let's take a closer look at three reasons investors can continue to be optimistic about Palantir going forward. 

Software developer working on new program.

Image source: Getty Images

1. Palantir is racking up commercial customers 

Palantir increased its customer count to 304, up from 169 a year ago. Best of all, Palantir increased commercial revenue by an impressive 46% year over year. Commercial clients now make up 66% of Palantir's customers. Palantir's momentum with commercial customers is a good thing for the company -- while government customers are lucrative and provide stability, there is much more long-term upside from gaining traction with large enterprise customers in the commercial market.

Palantir grew overall revenue by 26% year over year to $473 million and surpassed $1 billion in revenue over the trailing-12-month period for the first time ever. Palantir grew commercial revenue much faster than overall revenue at 46% year over year to $210 million. The company's revenue growth with U.S. commercial customers was even more impressive, coming in at an outstanding 120%.

So while shares of Palantir are selling off, the phenomenal revenue growth and increasing traction with commercial customers are both good signs for the long term.

2. The net retention rate shows Palantir's customers are happy

Here's another encouraging number from Palantir: 119%. That's Palantir's net dollar retention rate. Net retention rate is a key metric for evaluating software companies like Palantir. That 119% rate means that not only does Palantir not lose many customers, it retains the recurring revenue from these customers and actually makes 19% more in revenue from these existing customers year over year. While Palantir is growing rapidly and gaining new customers, it is also keeping its current customers happy, and this high net retention rate shows that its customers value its services. 

3. Palantir is adding staff 

Furthermore, at a time when tech companies like Coinbase Global are laying off large percentages of their workforces and even blue-chip mega caps like Alphabet and Meta Platforms are implementing hiring freezes, Palantir is bucking the trend and ramping up hiring. Palantir is on track to increase its headcount by 25% this year and has already hired or made offers to 1,100 employees, while tech stalwarts like Amazon, Meta Platforms, Apple, and Alphabet have collectively reduced headcount by 100,000.

This hiring spree stands out as a sign of strength against this backdrop -- Palantir is playing offense while the rest of the sector is playing defense and contracting. This strength means that Palantir should have increased capacity to take on and win new business. Furthermore, going against the grain should enable Palantir to hire talented developers and software engineers, and gain ground in what is always an arms race in the tech world.

Is Palantir stock a buy on the dip? 

While Palantir has staged a strong rally after hitting its 52-week low, it's still 60% off of its 52-week high. The stock's current price isn't that much higher than the reference price of $10 a share that Palantir debuted at via a direct listing in 2020. Unlike many companies that have struggled during the current bear market, Palantir is in a strong position with a pristine balance sheet. Palantir ended the quarter with $2.4 billion in cash and no debt, so it has plenty of liquidity to manage through any economic turbulence. With strong revenue growth, increasing momentum with commercial customers, an enviable net retention rate, and the strength to ramp up hiring at a time when other big tech companies are implementing layoffs, Palantir is starting to look like a sensible buy for long-term, risk-tolerant investors.