Peter Thiel’s Data Firm Palantir Turns a Profit as its Private-Sector Business Booms

Palantir is best known for its work for the U.S. government. But it's its growing commercial business that launched the company into profitability.

Palantir
Palantir went public in September 2020. FABRICE COFFRINI/AFP via Getty Images

Palantir Technologies, a data analytics firm cofounded by Peter Thiel, posted its first ever profitable quarter, three years after going public. The company is also on track to make money this year, CEO Alex Karp said during a call with analysts Feb. 13.

The company posted a quarterly net income of $31 million on $509 million of revenue for the three months ended December, beating analysts’ estimates. Palantir shares jumped more than 20 percent today (Feb. 14) to $9.22.

Palantir was founded in 2003 by Thiel, a PayPal cofounder and early Facebook investor, along with Karp and computer scientist Stephen Cohen. The company often makes headlines for its ties with well-known investors, such as philanthropist George Soros and Ark Invest founder Cathie Wood. But few people understand what the company actually does and how it makes money.

What does Palantir do, exactly?

Palantir provides data analysis and visualization service to government agencies and private-sector businesses. Its software products analyze large volumes of consumer-level data to inform decision-making with a stated goal to support Western liberal democracy and its allies, according to a company filing with the Securities and Exchange Commission (SEC) in 2020. Palantir’s government clients include the U.S. Army, Navy and Air Force. The SEC is also a client.

Palantir sells service contracts ranging between $2 million and $50 million. Roughly half of its revenue comes from large contracts, the company said in the earnings report.

In its early years, Palantir was best known for providing anti-terrorism analysis for the U.S. government. Its most memorable achievement is helping the Pentagon and CIA hunt down and kill Osama bin Laden in 2011, according to Mark Bowden’s 2012 book The Finish.

Its work has also drawn criticism. In March 2018, Palantir was accused of helping British data analytics firm Cambridge Analytics obtain the information of millions of Facebook users in developing ad-targeting strategies that eventually affected the result of the 2016 Presidential Election. Also in 2018, Palantir faced controversy for providing data analytics service for the U.S. Immigration and Customs Enforcement (ICE) in developing deportation and tracking programs.

More recently, Palantir rapidly expanded its commercial business. At the end of December 2022, Palantir had 143 commercial clients in the U.S., up 80 percent from a year ago. In the last five years, the company’s U.S. commercial business revenue grew nearly 900 percent, CEO Karp said in a letter to shareholders yesterday.

“When we were just starting out, many doubted our ability to evolve beyond anything more than a specialty provider of software to a handful of government customers, let alone generate meaningful revenue from the government sector as a whole,” Karp wrote in yesterday’s letter. “They were wrong.”

Palantir is a quiet leader in AI

In the shareholder letter, Karp called commercial interest in Palantir’s data products “unrelenting.” He credited the company’s success to its early investment in artificial intelligence.

“There has been a lot of talk about recent events in consumer internet and OpenAI and the incredible technologies that have been brought to bear,” Karp said on a call with analysts when asked how Palantir differentiates from other AI software providers. “We had a lot of thought going into this and spent the last five years building the core infrastructure that you would need to power and train AI algorithms.”

Currently, about 60 percent of Palantir’s revenue comes from the U.S. In the future, the company hopes to expand its client base internationally, serving the governments of the U.S. ally nations, Karp said.

Peter Thiel’s Data Firm Palantir Turns a Profit as its Private-Sector Business Booms