Palantir Vs. Cloudflare Vs. Snowflake: Who Wins the Platform Race?

Who Wins the Platform Game?

With the emergence of cheap models, AI innovators are scrambling to put these to work. But what is the best way to access these models? 

There are four key platforms that investors should have on their radar. Each one has a unique value proposition.

• Snowflake (NYSE:SNOW) is a versatile platform that is great for corporations that have an internal tech team that can leverage and build on Snowflake's platform (think CapitalOne).

• DataBricks (private) was the leader in AI before generative AI became a thing. Their original customer base was more tech-heavy (think Block), but the company has now diversified and grown significantly. 
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• Palantir (NASDAQ:PLTR) is a good solution for companies that want to outsource it all. The company started with mainly customers on the government side but has now diversified to customers across all industries. 

• Cloudflare (NYSE:NET) is the new kid on the block and started as a cybersecurity platform before expanding to Developer Services. Today it serves as a great platform for AI startups and customers that want to optimize their cost of accessing models.  

Here is how the revenues and financials compare across the different platforms (limited data for Databricks as it is private). 

Databricks currently has the highest growth, and Snowflake went from the highest growth of publicly traded platform companies to the lowest growth in this subset.

On an NTM Revenue basis, Snowflake, Palantir, and Databricks are all reaching ~$3B with Cloudflare being significantly smaller. 

How do these platforms compare from a valuation perspective: 

• Snowflake is in the penalty box and a "show me a story." This is why, while the company is expected to grow at a similar rate to Cloudflare and Plantir, it is trading at a significantly lower multiple.
   
• DataBricks is killing it in the private markets and demonstrating the highest growth out of the four (albeit not audited). The companies' latest round was at $62B with estimated revenues of $2-3B, implying a ~20-30x multiple and growing at 50-60% rates. 

• Palantir is firing on all cylinders but trading at an outlandish multiple compared to its growth. But what may be understated here is Planatir's growth. Although the overall growth rate for the company is in the 20s%, Commercial Services is growing at 60%+ rates and is expected to reach $1B in revenues in '25. 
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• Cloudflare likely has the highest growth prospects as it starts from the lowest base (note that the company revenues today come mostly from security services). Consequently, we expect growth inflection to be in the very early innings. 

YTD Performance

Here is how the stocks have performed YTD.

• Cloudflare is the lesser known of the three and is consequently surprising to the upside.

• Palantir is firing on all cylinders and is up ~55% this year after being up 340% last year.

• Snowflake is attempting to rise from the ashes, but it is significantly lagging behind. Will the company be able to turn growth around?  

In conclusion, cheap and open-source LLMs are broadening the economic viability of many AI projects. There are many ways to access these models and the companies that provide this service will be significant beneficiaries.

Written By: Ivana Delevska