Alex Karp, the frizzy-haired CEO of defense software company Palantir, has become somewhat of a pro at deflecting criticism. As he sat for an interview in April at the tech policy-focused Hill and Valley Forum in Washington D.C. and a heckler started shouting at him from the balcony, Karp retorted rather calmly, telling the audience he believed it was her right to express her views.
But this week—after Palantir reported blockbuster earnings on Monday—Karp took a moment to bask in his company’s meteoric rise and take a jab at his critics.
Palantir, based in Denver, surpassed $1 billion in quarterly revenue for the first time this week, posting growth figures that blew past analyst estimates. Palantir’s stock soared to more than $160 a share, marking a 555% increase from this time last year. By market close on Tuesday, Palantir’s market cap had hit nearly $409 billion, making it the 23rd most valuable company in the world, just behind Johnson & Johnson, a company with more than 23 times Palantir’s revenue and more than 35x the number of employees.
As he started speaking on Monday’s earnings call, Karp, who has a PhD in neoclassical social theory, was absolutely delighted—and true to form, a bit snarky, too.
“Well, as usual, I’ve been cautioned to be a little modest about our bombastic numbers, but honestly, there’s no authentic way to be anything but have enormous pride and gratefulness about these extraordinary numbers,” Karp said. As he wrapped up the call, he gave a quippy message to retail investors about the analysts that have “been wrong about every quarter.” “Maybe stop talking to all the haters—they’re suffering,” he said.
Palantir, a software company co-founded by Peter Thiel, has many “haters,” as Karp puts it. As a tech company that got its start selling to the U.S. military during the War on Terror, Palantir has been fully embedded in some of the most polarizing political debates of modern geopolitics. Particularly now, Palantir has stirred criticism over its software being used by Immigration and Customs Enforcement, as well as the Israeli military.
On the financial side, there’s a different kind of critic: those who question how such a relatively small company—one whose revenue and profits are so small in comparison to peers that it doesn’t even qualify for the Fortune 500 list—could reasonably become one of the most valuable companies in the world.
For Palantir, it has been a slow, albeit volatile, climb to where it is now—marked by contentious legal battles, noisy protests and picket lines, and an eccentric leadership team and employee base who sometimes endearingly refer to one another as “hobbits,” in credit to the company’s Lord of the Rings nomenclature (Palantir is in reference to the seeing stones created by Elves that allow people to see far away or communicate with others). And, more recently, in the last two years, Palantir has ridden the generative AI wave.
While the company is currently one of the best-performing stocks in the S&P 500, Palantir’s stock has also been known to be incredibly volatile, and sometimes dramatically influenced by retail investor activity. Palantir is undoubtedly having a moment—but will it last?
There are a host of near-term data points analysts look at: sales, cash flow, profit, customer retention. If you look at most of these near-term fundamentals, Palantir is trading at a premium.
But, as we speak, Pérez Mora reminds me about another important, longer-term metric for SaaS companies that Karp has repeatedly reminded onlookers to pay close attention to. That metric is called the “Rule of Forty.”
The Rule of Forty figure is calculated by adding the year-over-year revenue growth rate and adjusted operating margin. If those percentages are collectively higher than 40%, you have sustainable growth.
If you look at Palantir’s last quarter, Pérez Mora points out, the rule of 40 was 94%.
“That is the type of growth they are having. And the reality is that growth is accelerating, and that accelerating growth is not at the expense of profitability. And that is pretty unique,” she says, adding: “Palantir is trading as the company that they are growing into, and this is why it’s more expensive.”
There are a few key contributors to these numbers. For one, new government contracts.
But the lion share of growth at Palantir over the last year is coming from a newer segment of customers—the commercial side of the business. Revenue for the commercial side rose 93% year-over-year this past quarter. And nearly all of those contracts stem from the generative artificial intelligence platform it released in 2023, called “AIP” (which stands for the ever-original “artificial intelligence platform”).
Perez Mora says that while a lot of companies are building and offering large language models, Palantir has found a way to help companies make use of them—and drive real results for their businesses.
Investors seem to have taken note, as there is a direct correlation between the launch of AIP in 2023 and the steady upward trajectory Palantir’s stock has experienced since.
But generative AI is still new—and many companies and industries haven’t fully explored or realized just what jobs AI will be able to replace or make more efficient. Palantir itself doesn’t seem to have it sorted out either.
A Palantir spokeswoman said the company “does not provide the technology for Israel to conduct missile strikes or targeting operations in Gaza and has no involvement in the Lavendar or Gospel systems. These targeting capabilities are entirely independent of and predate our partnership with Israel’s Ministry of Defense.”
“Palantir prides itself on [a] culture of fierce internal dialogue and even disagreement on difficult issues related to our work,” a Palantir spokeswoman said. “The small number of former Palantir employees—13 of 4,000—raising concerns are certainly entitled to express their views.”
Now, with Thiel protegee J.D. Vance as Vice President of the United States, and a defense-tech-friendly White House in charge, the company has access to the inner circle at the highest levels of power. And Karp, who pens a “letter to shareholders” that’s published on Palantir’s site in English, German, and French each quarter alongside the financial results, has a lot of thoughts to share. “The United States is not, and should not be permitted to become, a soft compromise and amalgam of global values and tastes,” Karp wrote in his most recent letter, referencing a 1943 work by C.S. Lewis which describes “men without chests.”
“Such men without chests,” Karp says, “promise to shepherd us forward yet lack much substance and content, even a flicker of an animating worldview or belief structure, other than their own self-preservation and advancement.” For now, at least, Karp’s worldview and Palantir’s business seem to be defying the critics, the haters, and the chestless.
