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Palantir (PLTR 1.44%) gained a lot of attention when it went public through a direct listing in 2020. It initially developed its data analytics platform with funding from the CIA in response to the terrorist attacks of Sept. 11, 2001, and its technology was reportedly used to hunt down Osama Bin Laden in 2011. Its Gotham platform has been widely adopted by the U.S. military and a wide range of government agencies over the past two decades, and it boldly declared it would become the "default operating system for data across the U.S. government" in its S-1 filing prior to its public debut.

All that excitement propelled Palantir's stock price from its debut price of $10 to an all-time high of $39 in January 2021. But today, it trades at about $15 a share. It lost its luster as its growth cooled off and rising interest rates rattled the markets.

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I recently discussed Palantir's underlying problems, and noted that it still wasn't a bargain relative to its industry peers even though its profits were rising. Today, I'll cover three less obvious issues that smart investors should also be familiar with.

Palantir generated 45% of its revenue from its government clients in its most recent quarter. That business might initially seem rock-solid since Palantir established a first-mover advantage across the U.S. government, but it could actually be derailed by internally developed platforms across those agencies.

For example, Immigration and Customs Enforcement (ICE) has reportedly been developing its own data mining platform, RAVEn, to replace FALCON, the agency's customized version of Palantir Gotham. If other government agencies follow ICE's example over the next few years, Palantir's government business could gradually crumble.

In its latest annual report, Palantir admits that it is "fundamentally competing with the internal software development efforts of our potential customers." It doesn't directly address RAVEn or ICE in that report, but it admits that "organizations frequently attempt to build their own data platforms before turning to buy ours."

Throughout 2021 and 2022, Palantir invested more than $400 million into 20 start-ups that were merging with special purpose acquisition companies (SPACs). Each of those investments was worth $10 million to $40 million.

But there was an odd catch: All those companies needed to sign multiyear contracts with Palantir that either matched or exceeded the company's initial investment. As a result, Palantir secured more than $700 million in contracts from its own SPAC-backed companies, which significantly boosted its reported revenue in 2021. At the same time, it repeatedly told its investors it could grow its annual revenue by at least 30% over the long term.

However, critics will claim that strategy merely turned Palantir's own cash into revenue through risky investments. By the end of 2022, the average value of Palantir's SPAC-backed start-ups had plummeted about 80% after rising interest rates popped the SPAC bubble and drove investors away from speculative growth stocks.

Palantir's revenue only rose 24% in 2022, and it stopped reiterating its long-term outlook for 30% growth. It expects its revenue to only rise 14%-17% this year. It mainly blamed that slowdown on the macroeconomic headwinds, but the implosion of its pay-for-revenue SPAC portfolio likely exacerbated that pressure.

Most investors likely know Palantir's Gotham platform serves its government clients, while its Foundry platform serves its enterprise clients. However, it also launched a third platform, Apollo, as the support system for both platforms in 2021.

Apollo is a cloud-based platform that continuously delivers new features, security updates, and platform configurations to Gotham and Foundry. It's essentially the glue that holds Palantir's platforms together and ensures they can operate in "any environment." That cohesiveness, which makes Apollo comparable to cloud-based software update platforms like JFrog, ensures that Palantir's government and enterprise platforms both continue to operate at peak efficiency with the latest data.

These three factors might not matter as much as the near-term macro headwinds, but they tell us a lot about Palantir's future. It could face competition from internally developed platforms across the U.S. government, while the implosion of its SPAC portfolio raises troubling questions about its growth strategies. As for Apollo, it shows us that Gotham and Foundry are two sides of the same coin -- and that they both need to consistently mine data from disparate sources to keep growing.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JFrog and Palantir Technologies. The Motley Fool has a disclosure policy.

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3 Things About Palantir That Smart Investors Know - The Motley Fool