"Big tech" refers to the largest and most influential companies in the world, many of which are now witnessing remarkable growth thanks to the proliferation of artificial intelligence (AI).
Nvidia, Meta Platforms, Alphabet, and Amazon have been benefiting from AI adoption in multiple verticals such as cloud computing, social media, digital advertising, and e-commerce. And now, there's another company experiencing a strong acceleration in growth from the increasing demand for generative AI software.
Palantir Technologies (PLTR -2.52%) originally made its name by providing software and analytics solutions to intelligence agencies in the U.S. But for the past couple of years, its growth has improved by selling its AI software solutions to commercial customers as well. The company now seems to be on its way to becoming one of the most important names in AI software.
Let's look at the reasons Palantir could become the next addition to the roster of big tech names.
Image source: Getty Images.
Palantir is already one of the leaders in AI software
Palantir's Artificial Intelligence Platform (AIP), which was introduced in April 2023, has become a huge hit among customers. The platform enables both government and commercial customers to use large language models (LLMs) and other AI tools to automate processes and build applications to improve efficiency and productivity.
AIP has been ranked as the best AI platform by Forrester Research, above what's offered by other tech titans. It's helping to land new customers, as shown in the following table tracking the increase in overall customers since the launch of AIP in April 2023, and the value of new contracts that the company has been signing each quarter.
|
Period |
Total Customers |
Total Contract Value Booked |
|---|---|---|
|
Q2 2023 |
421 |
$642 million |
|
Q3 2023 |
453 |
$830 million |
|
Q4 2023 |
497 |
$1.15 billion |
|
Q1 2024 |
554 |
$904 million |
|
Q2 2024 |
593 |
$946 million |
|
Q3 2024 |
629 |
$1.1 billion |
|
Q4 2024 |
711 |
$1.4 billion |
|
Q1 2025 |
769 |
$1.5 billion |
|
Q2 2025 |
849 |
$2.3 billion |
Source: Palantir quarterly reports and earnings call transcripts
The customer count has doubled in the past couple of years. At the same time, the size of the contracts it's signing has jumped significantly. This is evident from the almost fourfold growth in the total contract value (TCV) during the same period.
AIP is also driving higher contract value because it's also encouraging existing users to sign bigger contracts. Management said on the recent earnings conference call that it is seeing "existing customers expand their work at a faster rate."
As a result, Palantir is now sitting on $7.1 billion worth of remaining deal value (RDV) -- the total value of its unfulfilled contracts at the end of the previous quarter. The 65% year-over-year jump in this metric was higher than the 48% increase in the company's quarterly revenue to $1 billion. Palantir, therefore, has strong revenue visibility that is likely to translate into years of growth.
On track to grow at an incredible pace
The company's revenue gains and the pace at which it is signing new contracts mean that it is expanding faster than the AI software platform market, which is expected to show an annual growth rate of nearly 39% through 2030. According to a report from researcher MarketsandMarkets, the AI software platforms are expected to generate just over $18 billion in revenue this year and $94 billion in 2030.
The market is expected to grow fivefold by the end of the decade. Palantir is expecting its 2025 revenue to land at $4.1 billion. That would put its share of the AI software platform market at almost 23% (based on the expected market size of $18 billion). If it keeps growing at a faster pace than the market, as it is currently doing, its share of this space would increase by 2030.
Assuming the company can increase its share to 30% in 2030, its annual revenue could hit $28 billion (based on the $94 billion estimate mentioned earlier). But then, Palantir has the potential to do better than that considering its leading position in the AI software platform market. Moreover, there are other estimates indicating that the annual revenue from AI software platforms could jump to $153 billion in 2028 itself.
As a result, Palantir Technologies' actual growth in the coming years could turn out to be much faster than expected, and that could be enough to help it become the next name in big tech.
