Let's face it: Palantir (NYSE: PLTR) is irresistibly cool. How could it not be? The company's name is straight out of The Lord of the Rings; its flagship product's name, Gotham, is straight out of a comic book; and its primary goal -- using artificial intelligence (AI) to identify and stop terrorist threats that would have been missed by human agents -- could be straight out of Mission: Impossible.
The stock is up 161% year to date, and that AI-based "cool factor" is likely part of why it's gotten investor's attention lately. After all, many investors clearly think AI stocks are pretty attractive, but some -- lookin' at you, c3.ai and Super Micro Computer -- have tumbled recently as they failed to live up to lofty expectations. Palantir, on the other hand, hasn't disappointed... yet. But as these other companies show, "cool" alone won't keep investors satisfied. Can Palantir's share price keep going up, or is it already too expensive to buy, no matter how cool it is?
Palantir's revenue growth has been surprisingly steady for such a young company, but that doesn't mean it hasn't been strong. In the most recent quarter, revenue was up 55% from the prior year. However, most of that revenue is coming from essentially a single client: the U.S. government, which provides 75% of Palantir's current revenue.
Palantir provides its Gotham threat-management software to numerous U.S. defense and intelligence agencies, allowing Gotham to access siloed data from across the agencies' systems and analyze it comprehensively. Naturally, the more agencies that use Gotham, the more data it can analyze, and the better its results become. This scaling of benefits serves as a competitive moat to the company's government revenue. In order to switch to a new system from Gotham, multiple agencies would have to approve of the switch and allocate resources to making it happen, which would be an expensive and complex process.
In addition to its steadily increasing government revenue from Gotham, Palantir has rolled out a number of commercial products for its growing number of corporate customers. The first of these products, named Foundry, operates similarly to Gotham, leveraging AI to analyze siloed information -- in this case, within different departments or business units of a company. The company's commercial products are popular -- commercial revenue growth has actually outpaced overall revenue growth. In its most recent quarter, Palantir's commercial customer count grew 83% year over year.