When it comes to artificial intelligence (AI), Palantir (PLTR 3.73%) is emerging as one of the most talked about companies. The elusive data analytics enterprise founded by Peter Thiel appears to be on a mission to prove that its AI capabilities can compete with the likes of big tech stalwarts Microsoft, Alphabet, and Amazon.
Palantir's CEO, Alex Karp, has been on a media blitz for the last several months, boasting about the company's demand prospects. Whether it's referrals from existing customers to inbound leads, demand generation can come in many forms. Karp and his team are doubling down on Palantir's ecosystem as the company continues to try to acquire market share in the AI arena.
Recently, the company revealed it is hosting something called Artificial Intelligence Platform (AIP) Bootcamp, during which prospective clients will identify a use case for Palantir's products within five days. Let's explore why Palantir is showcasing such a program and how this may serve as a bellwether for the company's AI roadmap.
Demand like never before
Palantir markets four core software platforms, each rooted in AI services such as machine learning and large language models (LLMs). Earlier this year, the company released its newest offering, AIP, which leverages generative AI applications to help businesses derive key insights.
Since its commercial launch, Palantir's management claims that over 100 enterprises are currently using AIP and that the backlog of prospective customers is "unlike anything we have seen in the past twenty years."
Given the billions of dollars that big tech is pouring into AI initiatives, it's likely safe to say that this new frontier of the technology realm represents huge potential. That said, there are some factors investors should be aware of before diving into the stock.
Image source: Getty Images.
Finding the right fit
While the secular trends of AI may seem obvious, it would behoove investors to zoom out and think about the long-term horizon. AI is very much in its early stages, and corporations of all sizes, from large enterprises to small and mid-size businesses, are still figuring out how the technology fits into the bigger picture and can play a critical role in digital transformation. In other words, AI applications will likely represent an increasing portion of IT spend over time.
But for now, a company is probably still exploring which use cases might best fit its specific challenges. For this reason, while Palantir claims to have hundreds of prospects in its pipeline, investors should be realistic about how much business the company may derive in the near term.
This dynamic leads me to the company's latest lead-generation project: AIP Bootcamp. The tagline for AIP Bootcamp reads: "From zero to use case in 5 days." While all this sounds nice on the surface, investors may want to get a sense of how AIP Bootcamp is benefiting Palantir right now, if at all. Per Palantir's blog, the company says that boot camp participants have been able to "solve problems that they have been struggling with for years in a matter of days."
Palantir's website has a simple form that end users can fill out to schedule their boot camp. During these sessions, users can test Palantir's software suite to figure out which product(s) best serve their needs. I find this approach interesting for a couple of reasons.
First, Palantir now has the ability to market several products in a singular demo. In theory, this could mean that Palantir ends up selling multiple products to the same client in just one sales cycle. Another interesting takeaway is that Palantir's end goal is to identify specific functionalities for its products within a company's existing architecture.
Should the boot camp prove successful, Palantir is ideally positioned to sell across different groups within the same organization. This should help Palantir generate exponential organic growth from new customers in a shorter timeframe. The upside potential of a sticky customer base could lead to significant revenue growth, margin expansion, and free cash flow as Palantir should not have to allocate as much spending on customer acquisition.
Should you invest in Palantir stock?
I recently wrote an article pointing out that some on Wall Street are skeptical of Palantir's foray into AI due to the company's current growth trajectory. For the quarter ended June 30, Palantir's revenue growth was 13%. However, for the trailing 12 months ended June 30, the company's customer count grew by 38%. So, while Palantir has done a nice job showcasing how clients use its software, the revenue profile seems a little disconnected.
In a way, I think Palantir has addressed these concerns with the advent of its boot camps. Palantir is clearly not rushing its capabilities to market but rather working closely with prospective customers to build a strong, healthy backlog. Further, by allowing these prospects to demo its services, Palantir is positioning itself to cross-sell and expand horizontally within various customer cohorts, effectively becoming a core thread in the business's broader data fabric.
To me, these boot camps represent a savvy marketing tactic aimed at building long-term relationships with customers. Long-term investors should be excited about their potential and pay close attention to the company's customer count and revenue growth, particularly in the next several quarters.
My stance is that Palantir's customer count may continue showing significant growth in the near to intermediate term. However, over the long term, I believe revenue and cash flow will experience noticeable growth as companies double down on Palantir and continue integrating its products across different use cases throughout the organization. And this demand, from my purview, all starts with the boot camps.
The company is demonstrating its ability to outmaneuver what is perceived to be its primary competition and is proving why it deserves to be in the same discussion as big tech. My thesis is that AIP Bootcamp will serve as a long-standing source of organic leads for Palantir and will be a major catalyst for new customers, higher average deal sizes, and more robust client retention.
For these reasons, it's hard not to think Palantir has a bright future and is quietly becoming a major force in AI.
