PLTR Unique Value in Volatile AI Trade, New NVDA & NBIS Partnerships

George Tsilis (0:04)

All right, welcome back to the Tech Corner. I'm George Tsilis, Senior Markets Contributor here with the Schwab Network. On this week's edition, we're going to be revisiting Palantir Technologies. Now, Palantir Technologies is an enterprise software company specializing in turning large amounts of complex data into operational decisions. The company originally built its software for US intelligence and defense agencies, but it has expanded rapidly into commercial enterprise. Palantir's major software platforms include Gotham, which is primarily used by defense and intelligence agencies, Foundry, which integrates data and business operations across an organization, and Apollo, which manages secure software deployments across cloud on-premise and highly restrictive environments.

Lastly, the AIP or what's called artificial intelligence platform, connects large language models and AI agents to an organization's proprietary data and operating systems. The bigger story today is Palantir is evolving from a data analytics company into an operating system for enterprise and sovereign artificial intelligence. Now, when it comes to competition, Palantir competes with companies across enterprise software, cloud data, and artificial intelligence. For example, Snowflake competes in enterprise data platforms, Oracle IBM and Microsoft compete across enterprise software, databases, and artificial intelligence. And cloud providers like Amazon, Microsoft, and Google increasingly offer competing AI and data management capabilities. Lastly, companies such as OpenAI and Anthropic could compete at portions of the AI application layer. Now, Palantir is somewhat different from other AI model developers. Its primary business is not creating the underlying AI model. This connecting models to an organization's actual data, authorizes permissions and business process so artificial intelligence can make decisions and take actions in a controlled environment. Palantir's biggest competitive advantage is what it calls ontology. In simple terms, the ontology creates a digital representation of an organization's real world operations. Instead of AI simply answering questions, Palantir could connect AI to things such as inventory, factories, aircraft, supply chains, customers, or even military assets as well.

This allows artificial intelligence to move from generating information to actually helping operate the organization. Palantir is also model agnostic. Customers can use models from companies such as OpenAI, Anthropic, Google, or even open-source developers without completely rebuilding their underlying data architecture. This is becoming especially important as governments and corporations increasingly want sovereign artificial intelligence, meaning they maintain control over their data models, as well as computing infrastructure. Going back to August 3rd of this year, Palantir recorded its second quarter results showing another significant acceleration in growth. Revenue reached approximately $1.94 billion of 93% year over year and 19% quarter-by-quarter sequentially. US revenue was a standout, up 115% to $1.57 billion, and another was commercial revenue, which increased 149% to $764 million.

US government revenue was up 90% to $809 million, while adjusted free cash flow also improved to $1.22 billion. This represents an adjusted free cash flow margin of around 63%.

Lastly, the company guided with US commercial revenue expected to grow 134% for the year. So therefore, the commercial side of Palantir is now growing even faster than the government business that originally defined the company. Also, when it comes to recent AI developments, the next phase of Palantir's strategy increasingly centers on sovereign artificial intelligence.

In September, Palantir expanded its partnership with Nvidia. Nvidia is using Palantir Foundry and AIP technology inside its own supply chain, combining Palantir software with Nvidia's AI models to identify constraints and improve operational decisions. Palantir also partnered with Nebus, naming it a preferred sovereign AI infrastructure partner. This gives Palantir customers another way to run AI models while retaining control over their own compute, data, as well as models in-house.

Lastly, Palantir increasingly wants to control the software and operating layer around AI, regardless of which model or computing infrastructure a customer chooses. Now, let's look at some other positives for Palantir. First off, as I mentioned, Q2 2026 results set those new records, with 93% year-over-year revenue growth, as well as 157% net dollar retention rate. The company also added 220 deals worth at least $1 million, supported by a strong US commercial segment. Management lifted full year guidance as well, and expects to continue accelerating growth in sales and earnings in 2027 The company's AI approach and partnerships with Nvidia and Nebus underpin large contracts and custom retention, as it empowers clients to control and customize their AI models, while maintaining strict data privacy and operational security. Palantir also holds over $9 billion in cash with virtually zero debt, fueling business expansion and providing significant financial flexibility. Not only is revenue growth robust, Q2 also demonstrated $1.22 billion in operating cash flow, as well as 62% operating margin. Therefore, this combination of extremely high revenue growth and expanding margins is unusual even amongst large software companies.

Now, another positive is diversification. Palantir is no longer primarily a government contractor. Its software is increasingly being deployed across multiple industries, such as manufacturing, aviation, healthcare, insurance, financial services, as well as supply chains.