Palantir Technologies (PLTR) risk factors, FY2024 10-K

Risks Related to Our Business and Industry

1. 01Until recent quarters, we had a history of incurring net losses, and we anticipate our operating expenses will continue to increase, and we may not be able to maintain profitability in the future
2. 02We may not be able to sustain our revenue growth in the future
3. 03Our sales efforts involve considerable time and expense, and our sales cycle is often long and unpredictable
4. 04We may not realize the full deal value of our customer contracts, which may result in lower than expected revenue
5. 05Seasonality may cause fluctuations in our results of operations and financial position
6. 06Our platforms are complex and may have a lengthy implementation process, and any failure of our platforms to satisfy our customers or perform as desired could harm our business, results of operations, and financial condition
7. 07If we do not successfully develop and deploy new technologies (such as technologies incorporating AI) to address the needs of our customers, our business and results of operations could suffer
8. 08Because we derive, and expect to continue to derive, substantially all of our revenue from customers purchasing our platforms and products, market acceptance of these platforms and products, and any enhancements or changes thereto, is critical to our success
9. 09If we fail to manage future growth effectively, our business could be harmed
10. 10If we are unable to hire, retain, train, and motivate qualified personnel and senior management, including Alexander Karp, one of our founders and our Chief Executive Officer, and deploy our personnel and resources to meet customer demand around the world, our business could suffer
11. 11If we are unable to successfully build, expand, and deploy our marketing and sales organization in a timely manner, or at all, or to successfully hire, retain, train, and motivate our sales personnel, our growth and long-term success could be adversely impacted
12. 12Our ability to sell our platforms and satisfy our customers is dependent on the quality of our services, and our failure to offer high quality services could have a material adverse effect on our sales and results of operations
13. 13If we are not able to maintain and enhance our brand and reputation, our relationships with our customers, partners, and employees may be harmed, and our business and results of operations may be adversely affected
14. 14Our reputation and business may be harmed by news or social media coverage of Palantir or our leadership, including but not limited to coverage that presents, or relies on, inaccurate, misleading, incomplete, or otherwise damaging information
15. 15Because we recognize a substantial portion of our revenue from our platforms and O&M services over the contractual term, downturns or upturns in new sales and renewals may not be immediately reflected in our results of operations
16. 16Our pricing structures for our platforms and services change from time to time, which could adversely impact our business, financial condition, and results of operations
17. 17If our customers are not able or willing to accept our product-based business model, instead of a labor-based business model, our business and results of operations could be negatively impacted
18. 18We have entered into, and expect in the future to enter into, agreements with our customers that include exclusivity arrangements or unique contractual, pricing, or payment terms, which may result in significant risks or liabilities to us
19. 19We face intense competition in our markets, and we may lack sufficient financial or other resources to maintain or improve our competitive position
20. 20customers’ perceptions of the viability of smaller or even mid-size software firms and consequently customers’ willingness to purchase from such firms
21. 21Our culture emphasizes rapid innovation and advancement of successful hires who may in some cases have limited prior industry expertise and prioritizes customer outcomes over short-term financial results, and if we cannot maintain or properly manage our culture as we grow, our business may be harmed
22. 22We may not enter into relationships with potential customers if we consider their activities to be inconsistent with our organizational mission or values
23. 23We do not work with the Chinese communist party and have chosen not to host our platforms in China, which may limit our growth prospects
24. 24Joint ventures, channel sales relationships, platform partnerships, and strategic alliances may have a material adverse effect on our business, results of operations and prospects
25. 25If we are not successful in executing our sales strategy, our results of operations may suffer
26. 26If the market for our platforms and services develops more slowly than we expect, our growth may slow or stall, and our business, financial condition, and results of operations could be harmed
27. 27We will face risks associated with the growth of our business in new commercial markets and with new customer verticals, and we may neither be able to continue our organic growth nor have the necessary resources to dedicate to the overall growth of our business
28. 28In the future, we may not be able to secure the financing necessary to operate and grow our business as planned, or to make acquisitions
29. 29Our debt agreements contain restrictions that may limit our flexibility in operating our business
30. 30Variable rate indebtedness that we may incur under our credit facility will subject us to interest rate risk, which could cause our debt service obligations to increase significantly

Risks Related to Intellectual Property, Information Technology, Data Privacy, and Security

1. 31our terms of service or is otherwise improper or perceived as improper, which could cause reputational damage and adversely affect our business, financial condition, and results of operations
2. 32Issues raised by the use of AI (including machine learning, large language and other generative AI models, and software functionality to operationalize the foregoing) in our platforms and business may result in reputational harm or liability
3. 33Our policies regarding customer confidential information and support for individual privacy and civil liberties could cause us to experience adverse business and reputational consequences
4. 34Failure to adequately obtain, maintain, protect and enforce our intellectual property and other proprietary rights could adversely affect our business
5. 35We have been, and may in the future be, subject to intellectual property rights claims, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies
6. 36Real or perceived errors, failures, defects, or bugs in our platforms could adversely affect our results of operations and growth prospects
7. 37We rely on the availability of licenses to third-party technology that may be difficult to replace or that may cause errors or delay implementation of our platforms and services should we not be able to continue or obtain a commercially reasonable license to such technology
8. 38Our platforms contain “open source” software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business

Risks Related to Legal, Regulatory, and Accounting

1. 39uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or otherwise harm our business
2. 40or inadvertent breach of applicable legal, regulatory, or contractual privacy, data protection, or information security requirements by us, our employees, our business partners, or our customers
3. 41Our non-U.S. sales and operations subject us to additional risks and regulations that can adversely affect our results of operations
4. 42Failure to comply with governmental laws and regulations or contractual requirements could harm our business, and we have been, and expect to be, the subject of legal and regulatory inquiries, which may result in monetary payments or may otherwise negatively impact our reputation, business, and results of operations
5. 43We have previously been, and are currently, or in the future may become, involved in a number of legal, regulatory, and administrative inquiries and proceedings, and unfavorable outcomes in litigation or other of these matters could negatively impact our business, financial conditions, and results of operations
6. 44Failure to comply with anti-bribery and anti-corruption laws could subject us to penalties and other adverse consequences
7. 45Governmental trade controls, including export and import controls, sanctions, customs requirements, and related regimes, could subject us to liability or loss of contracting privileges or limit our ability to compete in certain markets
8. 46Changes in accounting principles or their application to us could result in unfavorable accounting charges or effects, which could adversely affect our results of operations and growth prospects
9. 47If our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in our stock price
10. 48We could be subject to additional tax liabilities
11. 49We may not be able to utilize a significant portion of our net operating loss carryforwards and tax credits, which could adversely affect our results of operations
12. 50Our results of operations may be harmed if we are required to collect sales or other related taxes for our license arrangements in jurisdictions where we have not historically done so

Risks Related to Relationships and Business with the Public Sector

1. 51We have contracts with governments that involve classified programs, which may limit investor insight into portions of our business
2. 52Our business could be adversely affected if our employees cannot obtain and maintain required personnel security clearances or we cannot establish and maintain a required facility security clearance
3. 53Failure to comply with laws, regulations, or contractual provisions applicable to our business could cause us to lose government customers or our ability to contract with the U.S. and other governments
4. 54Evolving government procurement policies and increased emphasis on cost over performance could adversely affect our business
5. 55Increased competition and bid protests in a budget-constrained environment may make it more difficult to maintain our financial performance and customer relationships
6. 56A decline in the U.S. and other government budgets, changes in spending or budgetary priorities, or delays in contract awards have affected and may continue to significantly and adversely affect our future revenue and limit our growth prospects

Risks Related to Ownership of Our Class A Common Stock

1. 57The public trading price of our Class A common stock may be volatile and may decline regardless of our operating performance
2. 58Sales of substantial amounts of our Class A common stock in the public markets or the perception that sales might occur, could cause the trading price of our Class A common stock to decline
3. 59There are no guarantees that our Share Repurchase Program will result in increased shareholder value
4. 60Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage certain types of transactions that may involve an actual or threatened acquisition of the Company, which will likely depress the trading price of our Class A common stock
5. 61If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us, our business or our market, or if they change their recommendation regarding our Class A common stock adversely, the trading price and trading volume of our Class A common stock could decline
6. 62Although we currently are not considered to be a “controlled company” under The Nasdaq Stock Market LLC (“Nasdaq”) corporate governance rules, we may in the future become a controlled company due to the concentration of voting power among our Founders and their affiliates
7. 63We do not expect to pay dividends in the foreseeable future
8. 64The multiple class structure of our common stock has the effect of concentrating voting power with certain stockholders, in particular, our Founders and their affiliates, which will effectively eliminate your ability to influence the outcome of important transactions, including a change in control
9. 65The Founder Voting Trust Agreement and the Founder Voting Agreement also have the effect of concentrating voting power with our Founders and their affiliates, which will effectively eliminate your ability to influence the outcome of important transactions, including a change in control
10. 66In certain circumstances in the future, the Founders and their affiliates could have voting power that exceeds 49.999999% of the Voting Power
11. 67entitled to zero votes per share on that matter, all of the shares that are then subject to the Founder Voting Agreement would continue to be voted in accordance with the decision of a majority in number of the Founders who are then party to the Founder Voting Agreement
12. 68decision of a majority in number of the Founders who are then party to the Founder Voting Agreement, regardless of such Founders’ relative ownership of any class of our common stock
13. 69The Ownership Threshold that must be met on any applicable record date is a small minority of our outstanding Corporation Equity Securities, and future issuances of Corporation Equity Securities may decrease this percentage
14. 70The multiple class structure of our common stock features certain provisions that are novel or otherwise not common among other corporations with multiple class structures
15. 71The multi-class structure of our common stock, the Founder Voting Trust Agreement and the Founder Voting Agreement by which our Founders exercise effective control over all matters submitted to a vote of our stockholders will exist for the foreseeable future
16. 72Our governance structure may negatively affect the decision by certain institutional investors to purchase or hold shares of our Class A common stock
17. 73Future issuances of our Class A common stock will dilute the voting power of our Class A common stockholders but may not result in further dilution of the voting power of our Founders who are then party to the Founder Voting Agreement
18. 74Adverse economic conditions or reduced technology spending may adversely impact our business
19. 75We may face exposure to foreign currency exchange rate fluctuations
20. 76Natural disasters, including climate change, and other catastrophic events beyond our control could harm our business
21. 77If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired
22. 78We incur significant costs and demands upon management as a result of complying with the laws and regulations affecting public companies which could adversely affect our business, financial condition, and results of operations