There has been significant interest in artificial intelligence (AI) stocks lately.
Palantir (PLTR -3.12%), a leading software company, is getting enormous interest as investors look to invest in companies benefiting from the AI tailwind.
Still, investors must do their due diligence before investing in any stock. As such, they should at least know these two aspects of Palantir before buying its stock.
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A quick overview of Palantir's economic model
Founded in 2003 to build software for counterterrorism operations, Palantir has evolved into a significant player in the software industry, serving government agencies in Western countries and sectors such as energy, transportation, financial services, and healthcare.
Using Palantir's Gotham platform, government agencies, and intelligence organizations gain insights by analyzing large volumes of data from various sources, helping them make fast, informed decisions. Similarly, businesses use Palantir's Foundry platform to help them analyze large amounts of data from different sources to improve their decision-making and business operations.
Another essential product to know is Palantir's Apollo platform, the underlying control layer that powers Gotham and Foundry. Apollo helps manage new software features delivery, security updates, and others, ensuring that customers can operate their software in all environments -- think submarines, war zones, and more.
In other words, investors can think of Palantir as a software company helping governments and companies make sense of their datasets to improve their decision-making process. In return, customers pay subscription fees for using Palantir's software and other professional fees for consultation, training, and additional support.
In 2022, 56% of Palantir's $1.9 billion revenue came from government agencies, while the remaining 44% was from commercial customers. It has a relatively diversified customer base, earning 61% of its revenue that year from the U.S., while the rest from abroad.
What can investors expect from Palantir in the coming years?
Palantir has proliferated in the last three years, almost doubling its revenue from $1.1 billion in 2020 to $1.9 billion in 2022. While impressive, there is a good chance it can sustain this high growth rate for years.
Palantir can leverage its existing platforms -- Gotham and Foundry -- to attract new customers locally and in overseas markets. For example, it can leverage its reputation of serving government agencies to recruit new government customers.
And while Foundry came much later than Gotham, it has opened up even more opportunities for the company to tap other industries beyond the government sector. For example, it partnered with Airbus in 2017 to enter the aviation industry, and that relationship has allowed the company to build an industry-wide business.
Palantir is also well-positioned to ride the growing AI tailwinds, especially as companies experience the transformation benefits of recent developments in generative AI. To this end, Palantir has recently launched Artificial Intelligence Platform (AIP), which enables enterprises to leverage large language models on their private data. It will be an essential tool to help it gain market share in this area.
In this case, Palantir's relationships with existing customers will be helpful. Customers already use Palantir's software platform, so the AIP will be another powerful tool to help customers get more from their datasets. And as the demand for enterprise software continues to evolve and grow, we can count on Palantir to keep adding new products and services to sustain its growth.
Is Palantir stock a buy?
Palantir presents an intriguing opportunity for investors interested in the software sector. As a leading software provider, it already offers powerful platforms like Gotham and Foundry, catering to government agencies and various other industries.
And with AIP, the company is positioning itself to benefit from the rise of AI by serving existing customers and attracting new ones. In other words, the software company is well positioned to grow for many years.
All said, investors should keep an eye on the company.
