Enterprises are spending heavily on artificial intelligence (AI)-powered software to drive automation and efficiency, and use data to make smarter and faster decisions. And that trend may be just getting started. The enterprise AI market could grow at an annual rate of 37.6% between 2025 and 2030, according to analysis from Grand View Research.
Two companies poised to see years of growth ahead in the enterprise-software space are Palantir Technologies (NYSE: PLTR) and Microsoft (NASDAQ: MSFT). Both companies have already seen the benefits of massive AI-related spending for their business and shareholders. Palantir stock is up 230% this year alone, as of this writing. Microsoft is up 77% since announcing an increased stake in generative AI leader OpenAI in early 2023.
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Despite the strong outlook for the industry, Wall Street analysts only expect one of these enterprise-software leaders to keep climbing higher over the next 12 months.
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Palantir has a median-price target of $38 per share, based on the estimates of 22 analysts. That implies a downside of 30% from its share price, as of this writing.
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Microsoft has a median-price target of $500 per share, based on the estimates of 57 analysts. That implies upside of 18% from its share price, as of this writing.
Here’s what investors need to know.
Palantir develops software to help government agencies and commercial clients use big data to find insights and create operational efficiencies. Its initial focus on government contracts allowed it to develop a framework that it could apply to big commercial-enterprise customers as well.
Palantir’s commercial-customer count is growing quickly, up 51% year over year. U.S. commercial revenue grew 54% year over year in the third quarter, fueling overall growth of 30%.
At the same time, its adjusted-operating margin expanded to 38% from 29% a year ago, as it leverages its growing scale. It’s blowing past the Rule of 40, which suggests it could have even more room to grow faster if it spent more on sales and marketing. But CEO Alex Karp would rather focus his attention on building a great product for a few select clients with deep pockets. He suggests that leads to better results in the long term.
Palantir offers two main software platforms, Gotham for government clients and Foundry for commercial clients. It introduced the Apollo platform in 2021 to ensure continuous operations for clients and allow them to run its software in virtually any environment.
