Defense contractor Palantir says a ‘massive cultural shift in the U.S.' has justified 20 years of thankless toil. ‘We were the freak show … and we spent 20 years for this moment'
Palantir's commitment to serving U.S. military and intelligence agencies long made it an outlier in Silicon Valley. For years, CEO Alex Karp recalled on the company's first-quarter earnings call Monday, potential private-sector clients shied away from doing business with the upstart defense contractor and its quixotic chief executive.
But now, as chief technology officer Shyam Sankar noted on the call, companies like AIG, Citi, BP, Hertz, and fellow defense firm L3Harris are touting their gains from using Palantir's flagship Artificial Intelligence Platform, or AIP, to investors. Meanwhile, when it comes to the company's bread and butter, management—along with plenty of investors and Wall Street analysts—believes Palantir is perfectly suited to capitalize on efforts to cut federal spending and streamline government contracting.
'We were the freak show,' Karp said. 'And we spent 20 years for this moment.'
It's not hard to see why he feels vindicated. The company's U.S. revenue in Q1 grew 55% year over year and 13% from last quarter to $628 million. Even after Palantir's highly priced shares fell sharply after the earnings call, the stock is still up roughly 330% in the past year.
Karp, who cofounded the company with Peter Thiel, Stephen Cohen, and Joe Lonsdale in 2004, has become famous for his brazen and philosophical commentary. His quarterly letter to shareholders quoted Saint Augustine, the Gospel of Matthew, and a speech from Richard Nixon to staff on the day of his resignation in 1974.
His unorthodox style, however, doesn't appear to be getting in the way of results. On Monday, Palantir raised its forward guidance, projecting revenue to grow 36% to between $3.89 billion and $3.902 billion in 2025.
High expectations, however, are already baked into the stock price. Palantir shares currently trade at roughly 200 times its projected earnings over the next 12 months, according to estimates from S&P Capital IQ, compared with a forward P/E ratio of just over 20 for the S&P 500. That helps explain why the stock was down about 13% as of midday Tuesday, but shares are still up over 40% this year compared with the S&P's 4% decline.
Poised for the era of AI and DOGE
Mariana Pérez Mora, a VP of equity research in aerospace and defense at Bank of America, has called Palantir an 'overnight AI success 20 years in the making.' Karp echoed a similar message on Monday, citing a 'massive cultural shift in the U.S.' amid corporate America's embrace of the company's offerings. U.S. commercial revenue hit $255 million, soaring 71% compared with the same quarter last year and up 19% from the final quarter of 2024.
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