Palantir Technologies(NYSE: PLTR) has been on many investors' buy lists this year -- and that's helped the stock to soar about 75%. Investors have piled into the shares thanks to the company's tremendous growth and its use of artificial intelligence (AI) technology to serve its customers. Palantir helps governments, organizations, and companies make better use of their data to therefore become more efficient and more profitable.
The software-as-a-service company launched its Artificial Intelligence Platform (AIP) last year, and growth has taken off. In fact, in the most recent quarter, Palantir reported its biggest quarterly profit in the company's 20-year history. It's no surprise that the S&P 500 invited Palantir to join -- and that will happen as of market open on Sept. 23. Should you get in on this top technology stock before then? Let's find out.
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Palantir's path so far
First, a quick look at Palantir's path so far. For years, the company was more associated with government contracts than deals in the corporate world. But in recent times, Palantir has put the focus on growing its commercial business, and this is helping to supercharge revenue. Palantir's platform helps its customers aggregate all of their data and use it to make smart and even game-changing decisions.
For example, Tampa General Hospital uses AIP to manage staffing and bed placement, a move that's helped the hospital gain in efficiency. And Wendy's restaurants recently selected Palantir to help it power an AI-driven digital transformation -- the company will use AIP to access all data for decision making and will eventually use the platform for supply chain management and waste prevention.
As of the last reporting period, ended June 30, Palantir had 295 U.S. commercial customers. This may not seem like a lot but here are a few points to keep in mind. First of all, this represents 83% in customer count growth in the quarter year over year, so companies clearly are interested in what Palantir has to offer -- and this can even be seen in deal value growth, which climbed more than 100% from the same period a year ago.
Second, this number means there still is plenty of room for Palantir to sign on new customers and grow. Finally, these customers delivered $159 million in revenue for the company in the quarter -- deal sizes vary, but it's clear these customers are willing to enter into sizable partnerships with Palantir. (And it's also important to keep in mind that as recently as four years ago, Palantir only had 14 commercial customers in the U.S.)
Palantir's $10 million deals
Speaking of deal size, Palantir, counting both commercial and government businesses, closed 27 deals valued at more than $10 million in the quarter. On top of this, government revenue continues to climb in the double digits, 23% in the quarter to more than $370 million.
So Palantir has built a track record of success over the years thanks to its government business and in recent months has seen the commercial business take off -- and AIP is offering a new wave of growth for both of these segments. Demand "shows no sign of relenting," chief executive officer Alex Karp wrote in his latest letter to shareholders. Considering the interest in AI these days, forecasts for the market to reach $1 trillion by 2030, and Palantir's concrete results for customers, there's reason to be optimistic.
A key player in today's economy
But does all of this mean you should buy Palantir before its Sept. 23 addition to the S&P 500? This addition is significant as it recognizes the company is one of the powerhouses driving today's economy. And this may prompt more investors, over time, to buy the shares. The stock may also see some gains in the near term as S&P 500 trackers add the shares -- they have to do this as their goal is to mimic the index's performance.
All of that is positive, but what truly makes Palantir a buy is the company's long-term growth prospects, which look solid considering the momentum we've seen in recent times. And if you hold on for the long term -- which is the best way to invest -- you don't have to precisely time your purchase to benefit. This means Palantir makes a terrific AI growth buy now -- and after Sept. 23.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
