Alex Karp, the frizzy-haired CEO of protection software program firm Palantir, has change into considerably of a professional at deflecting criticism. As he sat for an interview in April on the tech policy-focused Hill and Valley Discussion board in Washington D.C. and a heckler began shouting at him from the balcony, Karp retorted relatively calmly, telling the viewers he believed it was her proper to precise her views.
However this week—after Palantir reported blockbuster earnings on Monday—Karp took a second to delight in his firm’s meteoric rise and take a jab at his critics.
Palantir, primarily based in Denver, surpassed $1 billion in quarterly income for the primary time this week, posting progress figures that blew previous analyst estimates. Palantir’s inventory soared to greater than $160 a share, marking a 555% improve from this time final yr. By market shut on Tuesday, Palantir’s market cap had hit practically $409 billion, making it the twenty third most precious firm on this planet, simply behind Johnson & Johnson, an organization with greater than 23 occasions Palantir’s income and greater than 35x the variety of staff.
As he began talking on Monday’s earnings name, Karp, who has a PhD in neoclassical social principle, was completely delighted—and true to kind, a bit snarky, too.
“Effectively, as typical, I’ve been cautioned to be a bit of modest about our bombastic numbers, however actually, there’s no genuine method to be something however have huge delight and gratefulness about these extraordinary numbers,” Karp mentioned. As he wrapped up the decision, he gave a quippy message to retail traders concerning the analysts which have “been fallacious about each quarter.” “Perhaps cease speaking to all of the haters—they’re struggling,” he mentioned.
Palantir, a software program firm co-founded by Peter Thiel, has many “haters,” as Karp places it. As a tech firm that bought its begin promoting to the U.S. navy through the Conflict on Terror, Palantir has been totally embedded in among the most polarizing political debates of recent geopolitics. Significantly now, Palantir has stirred criticism over its software program being utilized by Immigration and Customs Enforcement, in addition to the Israeli navy.
On the monetary aspect, there’s a unique form of critic: those that query how such a comparatively small firm—one whose income and earnings are so small compared to friends that it doesn’t even qualify for the Fortune 500 listing—may fairly change into some of the invaluable firms on this planet.
For Palantir, it has been a sluggish, albeit unstable, climb to the place it’s now—marked by contentious authorized battles, noisy protests and picket strains, and an eccentric management staff and worker base who typically endearingly refer to 1 one other as “hobbits,” in credit score to the corporate’s Lord of the Rings nomenclature (Palantir is in reference to the seeing stones created by Elves that enable folks to see distant or talk with others). And, extra lately, within the final two years, Palantir has ridden the generative AI wave.
“They’ve bought their toes beneath them—they’ve bought their gross sales cycle down a bit of bit extra. They’re simply making issues actually, actually sticky for big multinational firms,” says Evan Loomis, a enterprise capitalist who’s shut pals with Palantir cofounder Joe Lonsdale and whose development expertise startup, ICON, makes use of Palantir’s software program platform Foundry.
Whereas the corporate is at the moment one of many best-performing shares within the S&P 500, Palantir’s inventory has additionally been recognized to be extremely unstable, and typically dramatically influenced by retail investor exercise. Palantir is undoubtedly having a second—however will it final?
‘Two occasions costlier’
There are a bunch of near-term knowledge factors analysts take a look at: gross sales, money circulate, revenue, buyer retention. When you take a look at most of those near-term fundamentals, Palantir is buying and selling at a premium.
“They’re buying and selling a minimum of two occasions costlier on the normal metrics,” says Mariana Pérez Mora, an fairness analyst at Financial institution of America Securities, who has been following the corporate since 2022.
However, as we communicate, Pérez Mora jogs my memory about one other vital, longer-term metric for SaaS firms that Karp has repeatedly reminded onlookers to pay shut consideration to. That metric is named the “Rule of Forty.”
The Rule of Forty determine is calculated by including the year-over-year income progress charge and adjusted working margin. If these percentages are collectively increased than 40%, you’ve gotten sustainable progress.
When you take a look at Palantir’s final quarter, Pérez Mora factors out, the rule of 40 was 94%.
“That’s the kind of progress they’re having. And the truth is that progress is accelerating, and that accelerating progress will not be on the expense of profitability. And that’s fairly distinctive,” she says, including: “Palantir is buying and selling as the corporate that they’re rising into, and for this reason it’s costlier.”
There are a couple of key contributors to those numbers. For one, new authorities contracts.
Palantir has been working with the federal government because the starting—its first buyer being the CIA—and authorities contracts nonetheless make up a majority of its enterprise. On the finish of July, Palantir signed a 10-year contract value as much as $10 billion with the U.S. Military. It was one of many largest software program contracts the Division of Protection has ever signed and, by far, Palantir’s largest contract to-date. And, satirically, it’s the identical buyer Palantir sued (efficiently) nearly 10 years in the past, accusing the division of unlawfully excluding firms like Palantir from its procurement course of.
There might be extra contracts of this scale on the desk, too. The Fostering Reform and Authorities Effectivity Act, or FoRGED Act, at the moment on the desk would reshape the Division of Protection’s procurement course of for personal contracts, eliminating a whole lot of statutes and making it simpler for tech firms like Palantir to promote to the federal government. The laws, which Palantir has publicly endorsed and which its executives have pushed for in public hearings, would possible lower into the benefit that among the business incumbents like Boeing, Lockheed Martin, RTX, and Northrop Grumman have gained through the years.
The Division of Protection has been making trims to its price range since Trump named Pete Hegseth to the highest position. However Palantir is seemingly benefitting from that, too. Solely a pair months after the Division of Protection mentioned it had lower greater than $5.1 billion in contracts to consulting companies, together with Accenture and Deloitte, each firms introduced new strategic partnerships with Palantir to collectively ship options to authorities shoppers.
However the lion share of progress at Palantir during the last yr is coming from a more recent section of consumers—the industrial aspect of the enterprise. Income for the industrial aspect rose 93% year-over-year this previous quarter. And practically all of these contracts stem from the generative synthetic intelligence platform it launched in 2023, known as “AIP” (which stands for the ever-original “synthetic intelligence platform”).
Perez Mora says that whereas lots of firms are constructing and providing massive language fashions, Palantir has discovered a approach to assist firms make use of them—and drive actual outcomes for his or her companies.
On this final earnings name, Karp mentioned that Citibank was onboarding its clients and working the related know-your-customer and safety checks in seconds, down from 9 days. He mentioned that residential mortgage enterprise Fannie Mae is uncovering mortgage fraud in seconds, versus two months. And he mentioned that Lear Company is utilizing Palantir’s platform to handle tariff publicity.
Traders appear to have taken word, as there’s a direct correlation between the launch of AIP in 2023 and the regular upward trajectory Palantir’s inventory has skilled since.
However generative AI continues to be new—and lots of firms and industries haven’t totally explored or realized simply what jobs AI will be capable to change or make extra environment friendly. Palantir itself doesn’t appear to have it sorted out both.
CEO Karp mentioned in an interview on CNBC this week that he thinks Palantir may continue to grow income whereas lowering headcount by 500 jobs to about 3,600 folks. However when you take a look at Palantir’s headcount, it has been doing the alternative: including about 200 folks between 2023 and 2024, not slicing roles. For all that firms like Alphabet or Salesforce are boasting of the efficiencies they’re including inside their ranks by utilizing AI, those self same firms have seen their workforces develop.
One in all Silicon Valley’s most controversial firms
Palantir’s valuation could also be climbing to new heights, however the firm is as controversial as ever. They’ve been the goal of sit-ins, picketings, and different protests which have pulled in a whole lot of individuals in New York Metropolis, Palo Alto, Denver, Seattle, and Los Angeles, condemning Palantir’s contract with the ICE (Palantir has been working a six-month pilot contract “centered on enforcement prioritization and immigration lifecycle administration,” the corporate says.) Palantir has a partnership with the Israeli Protection Forces for “war-related missions,” which has additionally come beneath hearth. A report submitted to the UN Human Rights Council in June that singled out firms aiding Israel within the warfare in Gaza, together with Lockheed Martin, mentioned there was “cheap grounds to consider” Palantir was offering computerized predictive policing expertise and core protection infrastructure to Israel.
A Palantir spokeswoman mentioned the corporate “doesn’t present the expertise for Israel to conduct missile strikes or concentrating on operations in Gaza and has no involvement within the Lavendar or Gospel methods. These concentrating on capabilities are totally impartial of and predate our partnership with Israel’s Ministry of Protection.”
Tayfun Coskun—Getty Photographs
Karp addressed among the criticism Palantir has obtained through the years on the final earnings name. “Palantir will get attacked simply because we assist make this nation even higher, as a result of we assist the values, as a result of we defend it,” he mentioned. Earlier this yr, Karp and Palantir’s head of company affairs, Nicholas Zamiska, revealed The Technological Republic, which criticizes Silicon Valley for spending its time on client apps and dodging working with the federal government and taking part in a job in defending freedoms and democracy.
However there has additionally been some notable pushback even from former staff within the final couple years. In Could, greater than a dozen former Palantir staff signed an open letter to the tech neighborhood, alleging that Palantir had violated rules core to the corporate as a consequence of its work with the Trump Administration.
“Palantir prides itself on [a] tradition of fierce inner dialogue and even disagreement on troublesome points associated to our work,” a Palantir spokeswoman mentioned. “The small variety of former Palantir staff—13 of 4,000—elevating issues are definitely entitled to precise their views.”
Regardless of heightened criticism on the general public stage, Silicon Valley has come to not solely settle for, however embrace protection tech since 2022, when Russia invaded Ukraine. It’s one of many hottest sectors round proper now, with firms like drone startup Anduril garnering a $30.5 billion valuation within the non-public markets.
Certainly, tech firms used to draw back from protection contracts. However beneath the Trump Administration, there’s been a tidal shift. Meta teamed up with Anduril to start out engaged on helmet and headset initiatives for the U.S. navy. Quite a few LLM firms, together with OpenAI, xAI, and Anthropic, began working with the Division of Protection on nationwide safety. Even Google, which famously stopped working with the federal government in 2018 after inner upheaval from its staff, has gotten into the navy enterprise.
In some methods, Palantir—and SpaceX, too—have been a catalyst for the shift. Palantir had initially been rejected from high Silicon Valley enterprise capital corporations when the founders tried to boost preliminary capital, as Sequoia Capital and Kleiner Perkins each famously handed on the funding. Cofounder Thiel ended up placing in a lot of his personal cash and elevating capital from former officers from President George W. Bush’s administration in addition to the CIA’s enterprise capital agency In-Q-Tel.
Now, with Thiel protegee J.D. Vance as Vice President of the US, and a defense-tech-friendly White Home in cost, the corporate has entry to the inside circle on the highest ranges of energy. And Karp, who pens a “letter to shareholders” that’s revealed on Palantir’s website in English, German, and French every quarter alongside the monetary outcomes, has lots of ideas to share. “America will not be, and shouldn’t be permitted to change into, a mushy compromise and amalgam of world values and tastes,” Karp wrote in his most up-to-date letter, referencing a 1943 work by C.S. Lewis which describes “males with out chests.”
“Such males with out chests,” Karp says, “promise to shepherd us ahead but lack a lot substance and content material, even a flicker of an animating worldview or perception construction, apart from their very own self-preservation and development.” For now, a minimum of, Karp’s worldview and Palantir’s enterprise appear to be defying the critics, the haters, and the chestless.
