Source: Company Information; Leverage Shares analysis

The company’s sources the majority of its revenue from government contracts, predominantly the U.S. While revenues from commercial parties has seen momentary blips of increase in the occasional past quarter, an approximate 55:45 split between government and commercial sources does eventually settle in in the course of the FY.

While services provided to commercial parties can arguably be discussed more openly, details remain sparse – likely due to the fact that most commercial parties involved are also providing the government with services requiring a substantial degree of secrecy, i.e. the military and intelligence services. In fact, founder and CEO Alex Karp states in his recently-published book „The Technological Republic“ that Palantir was founded amidst a broad abandonment of American „political projects“ by the current generation’s technological elites while it set out to work for American defense and intelligence agencies.

This emphasis on the military side of the America’s „political projects“ even resonates in the company’s messaging via the letter to shareholders by Mr. Karp in Q4 2024 and Q1 2025. In the Q4 2024 letter, Mr. Karp discussed numbers before asserting that the company is flying in the wrong direction at the height of the American consumer internet bubble. After telegraphing the then-upcoming release of „The Technological Republic“, the letter concluded with a quote by Samuel P. Huntington which stated that the rise of the West was not made possible “by the superiority of its ideas or values or religion . . . but rather by its superiority in applying organized violence” before concluding “Westerners often forget this fact; non-Westerners never do.”

In the Q1 2025 letter, the company presses forward with its ideological leanings by stating that the company deems itself as a collection of „heretics“ cast out and nearly discarded by Silicon Valley whose interest lies in „arming the United States of America, in ensuring that its defense and intelligence agencies had software capabilities that were far more lethal and precise than those of its adversaries“ while asserting the country’s „establishment“ is not merely adrift but stuck in performative politics that has turned off vast swaths of the public.

Also included were sundry references to Saint Augustine, the Gospel of Matthew from the New Testament, Richard Nixon as well as (of course) „The Technological Republic“.

If one were to juxtapose Mr. Karp’s expositions with the company’s commercial prospects, it should be clear that the company is predominantly driven by spending on the military side of America’s ongoing „political projects“ regardless of whether it’s labeled „government“ or „commercial“ revenue. Thus, while it labels only 55% of its revenue as coming from government sources, the likely reality is that most (if not almost all) is directly influenced by government spending. In this, the company’s arguably-necessary obtuseness in drilling deep into what its services entails works against it.

The high „concentration risk“ in revenue sources is the first factor in the stock, which closed trading on the 6th of May with over a 12% fall in price. With a 64.6% increase in the stock price already in the YTD before the earnings release with the stock itself trading at about 189 times earnings expectations for the next 12 months¹, there were already substantial grounds for a correction.

Meanwhile, the current administration rode into power at a time when popular sentiment among American citizens is steadily and resolutely shifting towards a resolutely anti-war sentiment regardless of political affiliation. Simultaneously, the company decries the commercial aspect of America’s tech economy whilst the current administration’s ongoing tariff war (as discussed in a recent article²) is being waged to ostensibly restore, rehome and improve the U.S. economy’s global commercial capabilities.

Now, the anti-war sentiment doesn’t necessarily include an unwillingness to defend the United States from threats at or within its borders but the adventurism overseas that has been a hallmark of America’s foreign policy on a bipartisan basis since the Second World War is increasingly a turn-off (as Mr. Karp put it) for a growing swath of the public that various surveys indicate has already breached the halfway mark.

Given the nature of the company as outlined by its principal, the metrics by themselves aren’t nearly comprehensive: while it’s true that the top and bottom lines are trending towards growth, it is arguably dependent on continuing adventurism. While the administration’s anti-war leanings hasn’t entirely manifested, given that it hasn’t yet disengaged completely from the Middle East or against the Russian Federation in Ukraine, it stands to reason that further involvement elsewhere would be matter of caution. If there are no further „projects“, how meaningful are the growth projections? This question is the crux of the second factor that influenced the stock’s drop immediately despite encouraging trends in top and bottom lines.

Absent growing geopolitical adventurism from the American establishment and the company’s implied focus on the American establishment’s interests, there is limited upside potential for the commercially-minded investor. However, a substantial portion of the stock’s owners find ideological resonance with the company. For them, there may yet be no reason to divest.

However, the fact remains that ideology of the American public is shifting and with it that of the establishment. Plus, commercially-minded investors outnumber the ideologically-driven. Absent broad conviction, the stock could fall even further over the course of the quarter and fiscal year.

Professional investors in Europe might like to consider the +3x Palantir Long ETP (PLT3) for magnified exposure during upticks of the stock’s trajectory while the -1x Palantir Short Apple ETP (PLTS) is the equivalent of a short position without the need for maintaining a margin.

Footnotes:

1. „Why Palantir’s stock is falling even though its earnings were ‚on fire'“, Dow Jones, 6 May 2025
2. „“Liberation Day“ Tariffs: A Long-Term Strategy?“, Leverage Shares, 8 April 2025