Palantir’s New Clients are Irrelevant

Will numerous new clients lead to skyrocketing Revenues?

Editor: @Emanuele20x

In the recent article, we saw how the client number is the key driver for Palantir's growth because they are like seeds that will deliver recurring fruits in the future.

In the last quarters, client acquisition ramped up. Does this mean we will also see Revenues skyrocketing? Not really. At least, not immediately.

Clients acquired are almost irrelevant to current Revenues

Clients acquired in a specific year, account for less than 10% of total Revenues in that year.

New clients begin generating significant Revenues after the second year with Palantir, as we showed for the US Commercial Revenues (Palantir US Commercial is the Key).

This can lead us to say that Revenue growth is driven:

• in 1 year by the expansion of existing clients;

• in 2-5 years by the expansion of the clients acquired today.

A huge spike in clients now = substantial growth in 2 years. At least.

US Commercial

The new clients of US Commercial in 2021 generated $53mn from 63 clients, representing a spike in the contribution of Revenues from new clients in 2021.

Assuming these clients had the same +263% expansion on the second year as of those of the 2019 cohort, these 2021 clients could contribute to $140mn Revenues in 2022, bringing US Commercial Revenues above $350mn.

This would support a growth of US Commercial above +70% YoY.

US Government

On the Government side, we can see that clients acquired in a specific year contributed very little to the yearly Revenues, with the exception of 2020. The new clients contributed substantially to Revenues only in 2020 due to the pandemic.

During emergencies, the Government is more prone to increase their budgets for solutions that work.

I expect to see a similar dynamic in 2022 arising from the conflict in Ukraine.

Government

Comparing Government Revenues vs. US Government Revenues shows that 2018 was a crucial year as Palantir acquired substantial Revenues from International clients.

Conclusion

Despite the initially small Revenue generation from new clients, their future expansion is an important aspect for Palantir’s success.

This is why client growth is the key dynamic I will look for during the Q2 earnings results. (PLTR Q2 Earnings - What I’m looking for)

Clients now, fruits in two years.

What I care about is: where the company is going to be in a couple of years - Alex Karp, Palantir CEO.

Yours,
Arny

Join me on:
Twitter: @arny_trezzi
Youtube: @Arny Investing
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View expresses are my own. Do not represent Financial Advice. 

I own (many) PLTR 0.00%↑ stocks.