Why Palantir Got $700M Worth of Government Deals in September 2022
Who Is Partnered With Palantir?
712 million dollars, that is the total value of contracts that Palantir was able to secure in the month of September alone. One of the biggest months, at least as a public company, that Palantir has had.
Of the 15 contracts established, 14 are public deals with government run organizations.
Hyundai Heavy Industries for Korea Shipping and Offshore Engineering Subsidiaries, being the only private deal contract disclosed. An extension of $25 million over five years.
The Largest contract announced was with the US Army Research Lab for Project Maven. A one year contract worth $229 million that Google abandoned due to employee protests.
$712 million dollars, it really started in the last week of September. That last week, September 24th through September 30th, those six days they made about 680 million dollars. There are a couple of caveats to this, they have performance obligations. Meaning these contracts are worth “up to” $712 million under the premise that Palantir can perform. Also, some of these span over years so obviously they're not going to recognize all of this in Q3.
Project Maven $229 million, we don't know if they're gonna get the full $229. It looks like they will, but even still that will then be amortized throughout the duration of the contract.
Is Cathie Woods Wrong?
Kathy Woods sold out of the stock because the government spending was slowing down. Granted, she made the right decision here in the short term selling when she did at $12 with the stock sitting around $8 now. Ignoring the fact that she ended up putting it into Roku and some other socks that are performing a little bit worse than Palantir.
The logic behind that decision was discounting the fact that the macro sucked, which is why Palantir collapsed. Just like everything else collapsed. I don't think you can blame the stock price tanking on slowing governmental growth. Nonetheless, that was the rationale behind Cathy Woods selling Palantir.
If you look at these contracts, this is not slowing governmental growth.
The United States government passed $780 billion back in April or May as their official budget, and they have to spend it. Now is the time where companies like Palantir get these deals, at the bottom half of the year. Now is when these contracts actually need to be given, otherwise they can't justify the same budget, or a growing budget the following year.
This is partially why I think CEO Alex Karp was kind of angry on the earnings call. His entire argument was: Look, we averaged 30% CAGR on the government business for the past 10 years, some years it's up higher, some years it's lower.
The reason for that dichotomy is because getting governmental business is really hard. Landing next to a billion dollars in contracts, fully securing and solidifying them is not an easy feat.
In the month of September, that appears to be coming true.
Notice, this is only the United States. None of these governmental contracts are international.
There's a war happening between Russia & Ukraine. The precedent has been sent forth for countries like Denmark, which is using Palantir, Lithuania, Poland, and really anyone in that general region that could be susceptible to a Russia invasion in the worst case.
These are countries that are thinking about how to protect their National sovereignty, their privacy, and their citizens.
Alex Karp has said having a piece of software can make you become a superpower, even if you don't have the traditional things that make a superpower like nuclear weapons.
If Palantir can actually execute on that vision and deliver that key software to the many countries that require it, I believe that's worth more than any monetary value.
Government Business Is The Cherry On Top
There's an argument to be made that NATO's demand for Palantir makes the governmental business already a 100 billion dollar company. China & Taiwan is another scenario where we have no idea what's going to happen. If something does happen, there's more governmental spending.
I never bet it on Palantir to be a governmental company. That wasn't a major part of my bull case. I bought the company because I believe if their platform can be used in every vertical that exists from a commercial perspective, they're going to be a very big company.
The fact that they're getting 700 million in one month off governmental deals, that to me is just a cherry on top.
We've all seen Alex Karp talk about the complexities of this world. The more I've seen the world change, the more I'm thinking maybe the governmental side of this business has the potential to be a major opportunity, a major bull case for this company.
Overall September proved not to be a bad month for Palantir.
