During AIPCon last week, Palantir Technologies announced a significant partnership with Databricks. Since its commercial release in April 2023, Palantir’s Artificial Intelligence Platform (AIP) has facilitated the company’s evolution from a government-focused contractor to a broad enterprise software provider, significantly impacting customer acquisition, revenue growth, and profit margins.
Palantir, known for its transparency, hosts AIPCon events to showcase how its software enhances operational efficiency and fosters growth within various businesses. It was during the sixth installment of AIPCon that the collaboration with Databricks was revealed.
The partnership involves Palantir’s expertise in developing data ontologies, which assist businesses in visualizing and managing complex datasets, and Databricks’ specialization in data warehouses and data lakes, which enable businesses to process large datasets across multiple cloud platforms. This synergy allows corporations to enhance their AI capabilities by better integrating real-time analytics and data storage solutions.
Palantir has traditionally been viewed as a consultant for government entities, largely due to its strong connections with the Department of Defense. However, the introduction of AIP has significantly expanded its presence in the private sector, now contributing to nearly half of its revenues. Though Palantir serves 571 commercial customers, this is modest compared to the reach of Databricks, which serves over 10,000 businesses, including more than 60% of the Fortune 500.
This partnership with Databricks is strategically beneficial for Palantir, offering a chance to expand its commercial customer base by cross-selling within the Databricks ecosystem.
Despite its successes, Palantir’s valuation remains challenging to assess. Although profitable, it trades at high valuation multiples, making traditional valuation metrics less informative. Comparatively, using the price-to-sales ratio against other high-growth SaaS firms shows Palantir’s shares are still relatively expensive despite recent declines.
Nonetheless, significant growth opportunities remain due to Palantir’s strategic collaborations with major players like Meta Platforms, Amazon, Oracle, and Microsoft, although many of these collaborations are yet to fully realize their potential. Given its strong alliances in the software industry, Palantir’s sales and profit growth rates are expected to continue rising, presenting potential long-term investment opportunities despite the current stock price.
Randi Zuckerberg, a former director of market development and spokesperson for Facebook, and the sister of Meta Platforms CEO Mark Zuckerberg, is on The Motley Fool’s board of directors. Adam Spatacco holds positions in Meta Platforms and Palantir Technologies. The Motley Fool holds positions in and recommends several companies, including Palantir Technologies and Databricks, as well as others in the technology sector.
