Palantir Technologies (NASDAQ:PLTR) is a company that has been on a roll this year. Shares of PLTR have roughly doubled since the beginning of the year and have been on a roll recently. The company’s stock price even rose by more than 11% after the company announced an impressive partnership with Microsoft (NASDAQ:MSFT) to deliver enhanced analytics and AI services to classified networks of national security importance. As a trusted government contractor, Palantir has clearly benefited, elevating a number of its tech peers along the way.

Palantir’s big data capabilities and recent AI integrations have not only led to increased interest from government agencies, but also from commercial customers. This is one of the key bullish catalysts that many investors are focused on, and it’s a revenue and profit driver worth investigating. With increasing investment in growing its commercial customer base, there’s a good reason why Palantir has seen its stock price rise this year.

Of course, at over 30 times revenue, this is a stock priced for perfection. And maybe that’s putting it mildly. So let’s see if this AI and big data stock is worth buying at current levels, or on future declines.

Key points about this article:

• Palantir has become one of the biggest beneficiaries of the secular growth trend in AI and continues to see strong growth across government and commercial companies.
• Given its current valuation, some investors are right to be concerned. Let’s take a look at why this stock is still one of the most popular AI stocks right now.
• If you are looking for stocks with great potential, make sure to grab a free copy of our brand new report “The Next NVIDIA”It includes a software stock that we are confident has 10x potential.

Collaboration with Microsoft

Image of a Microsoft sign in front of the company’s office buildings

Palantir’s recently announced partnership With Microsoft, there’s one that investors will definitely want to pay attention to. The U.S. defense and intelligence community continues to turn to Palantir for its services, with additional requests for new AI, cloud and analytics capabilities for its core businesses.

The goal of this partnership is to integrate Palantir’s AI platforms used for government cloud environments with Microsoft’s Azure OpenAI service. This is expected toThe suite deploys into existing Azure Government clouds, enhancing AI-based operations in logistics, contracting, and action planning.

The consortium emphasized that services are dependent on government authorization. Microsoft’s leadership team emphasized the partnership’s role in advancing secure AI deployments for the U.S. government. Palantir reiterated the importance of this partnership, calling it a significant step toward improving the performance of defense and intelligence agencies by leveraging Microsoft’s clouds and AI models for national security.

Solid ambitions in the field of artificial intelligence

3D image of a brain and its blood vessels

Palantir’s dual customer base (originally focused on government) still generates more than half of revenue. Palantir’s AI software is expanding into commercial sectors and has seen remarkable growth, applicable across all industries. The Artificial Intelligence Platform (AIP) has driven unprecedented demand, driving U.S. commercial revenues by 40% YoY in Q1.

In Q2Palantir’s revenue grew 27% to $678 million, driven by both government and commercial sectors. The company reported $149 million in adjusted free cash flow and expects $800 million to $1 billion for the year. With $4 billion in cash on hand, Palantir expects to invest $450 million to $500 million in R&D in 2024, continuing its growth trajectory.

Palantir’s growth has been accelerated by AIP bootcamps, with 1,205 organizations participating as of mid-2023, leading to new deals. In June, Palantir’s customer base reached 593, up 172 year-over-year, with the number of U.S. commercial customers growing 9x over three years. In Q2 FY24, the company closed 96 deals valued at $1 million or more, including 27 over $10 million, driving continued growth.

Palantir stock could be a bargain on declines

The Palantir logo on a smartphone with a stock chart in the background

Palantir Technologies offers a suite of software platforms that address complex data challenges. Palantir Gotham Palantir, Inc. supports government agencies with advanced big data analytics for critical tasks. Palantir Foundry serves enterprises by building and analyzing data pipelines. And Palantir Apollo provides seamless integration between Gotham and Foundry. This diverse product lineup establishes Palantir as a leader in big data analytics for both government and commercial sectors.

The company’s economic moat stems from its proprietary software and strong government ties, providing a unique competitive advantage. Its flagship product, Gotham, is exclusive and strengthens its market position. With robust financials, growing commercial revenues, and strategic AI initiatives, Palantir presents an attractive long-term investment opportunity, despite the risks to its valuation.

Add to that the company’s recent partnership with Microsoft and its strong growth trajectory, and it’s easy to see why some investors might want to jump on this stock before it gets any higher. That said, it’s expensive at its current multiple. This is a stock that I think could fly when the next leg of the AI ​​hype train comes around the corner (fueled by rate cuts), but it’s also a stock that could see a big downturn if a recession hits. Such is the high-risk, high-reward nature of a stock like this. So far, it’s a trade-off that’s paid off for investors.

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