Palantir Partners To Increase Governmental Clients
Government Business Concerns
Palantir's governmental business results in their Q4 earnings shocked investors. Although they had increased governmental revenue 47%, the number of new clients they had in the space was zero.
They had 90 in FY 2020, and 90 in FY2021. They didn't lose clients, they got more money out of existing clients, but they didn't gain any more clients.
This news was so shocking that it forced Cathie Wood of Ark Invest to dump her entire Palantir position, taking an almost $400M loss on the stock.
Her reasoning was reinforced over the past two months: she doesn't think Palantir can grow in the governmental sector and as a result will not grow as fast as it needs to for Ark to justify holding it.
Palantir Is Making Moves In The Government Space
You can read the full press release here.
Today Palantir announced a new partnership with Carahsoft. Now, I didn't even know a company like Carahsoft existed. Apparently, the government needs a lot of help figuring out which vendors to provide contracts to for IT services, and Carahsoft is there to help with that.
The press release states, "In Palantir's new channel partner program, Carahsoft will serve as Palantir’s U.S. Federal Distributor, making Palantir’s industry-leading data operations software available to the U.S. Federal Government through Carahsoft’s reseller partners, contracted through NASA Solutions for Enterprise-Wide Procurement (SEWP) V.
This new partnership with Carahsoft enables government departments and agencies to acquire Palantir’s flexible and modular solutions."
Some important quotes from the partnership:
“Partnering with Carahsoft and its resellers will allow Palantir to fully leverage the value that the channel ecosystem brings, offering the government the ability to work with their trusted partners and have more options on how they can procure our joint solutions,” said Jennifer Talley, Head of USG Channel and Distribution at Palantir.
Lauren Penneys, Head of Sales, U.S. Government at Palantir, added: “We are thrilled to partner with Carahsoft, as we invest in growth and establish new routes to market that will increase access to Palantir's best-in-class software.”
“With the addition of Palantir to our offerings, Government agencies now have access to Palantir’s big data solutions to transform how they achieve their goals,” said Maryam Emdadi, Carahsoft Vice President. “We look forward to working with Palantir and our resellers to deliver mission critical technology to the government, and help agencies advance their digital modernization strategy.”
What This Means for Palantir's Government Business
When I saw this news, it confirmed to me that Palantir is trying to find new distribution and sales channels to actually increase their governmental clients.
This isn't something that should scare investors - after seeing Q4 gov clients stay flat, all investors should have realized that something is going to get done in order for them to increase governmental clients.
Whether that's adding a new federal advisory board, hiring new sales people (about 200 as per Karp's statements), or partnering with organizations like Carahsoft - they were always planning to figure out ways to increase governmental clients.
Cathie Wood sold the stock based on the logic that the government business was becoming competitive and Palantir wouldn't grow within it. It seemed like Palantir new last year that the governmental business was going to be competitive after not raising their client numbers and realized that steps had to be taken in order to find new methods of distribution within the government.
This partnership is one of them, specifically for the United States. However, the Russia/Ukraine crisis also accelerated the potential for more defense spending to go to Palantir due to their first in class services around data and analytics, as we saw here.
Overall, this is a great sign for Palantir to find new avenues to land government contracts. They likely new they needed new methods last year and are now beginning to put them to use - if these methods are successful, we should hopefully see an increase in the number of government clients over the next few quarters.
Which would mean the bear thesis around governmental growth Cathie Wood put out may just be wrong. Time will tell.