Both companies have leading software products.
There has not been a more popular software file than Palantir (PLTR 11.14%) on the market in 2024. The stock is up about 258% this year and has been one of the best to own this year. However, the run-up to the stock market brought high expectations, and investors may be forgetting other software stocks with a strong investment case, such as CrowdStrike (CRWD -2.21%).
Is Palantir the best software stock to buy between these two? Or is CrowdStrike the better option here?
Palantir and CrowdStrike operate in enormous growth markets
Although both stocks sometimes have the nickname “AI” attached to them, they do not compete and are in separate sectors.
Palantir makes specific use-case built AI software that can be described as data in, insights out. This helps equip decision makers within a company or government agency with the most up-to-date information possible. Additionally, Palantir’s newest product, Artificial Intelligence Platform (AIP), helps integrate large language models into a company’s internal operations, a big step toward using AI integrally rather than a product used alongside it.
CrowdStrike is a cybersecurity company that offers many different solutions through its Falcon platform. Most notably, the endpoint security software protects network access points from threats. It uses AI to analyze normal activities and potential threats and then shuts down the threat before it can do any damage. This is an incredibly popular cybersecurity solution, and CrowdStrike offers 28 modules that extend this basic functionality.
Both companies are incredibly successful in terms of business growth, yet they both have a huge industry in which they operate as cybersecurity and AI application products have a huge runway.
CrowdStrike and Palantir are posting similar financial results
Palantir’s latest quarterly results drew huge applause from investors as it sent the stock up more than 20% the next trading day. Revenue rose 30% year-over-year to $726 million, prompting expectations for fourth-quarter revenue to be around $769 million (indicating 27% growth).
These are excellent results, and many investors are excited about them.
However, CrowdStrike has been doing well (or better) for much longer.
CrowdStrike’s quarterly results have been pushed back by a month compared to Palantir’s, so we won’t have CrowdStrike’s Q3 fiscal 2025 (ending October 31) results until November 26. However, we can compare how CrowdStrike expects to perform in the third quarter and previous results. performance.
In the second quarter of fiscal 2025 (ended July 31), CrowdStrike’s revenue rose 32% to $964 million, while annual recurring revenue (ARR) rose 32% to $3.86 billion. So CrowdStrike is not only bigger from a revenue perspective, but it’s also growing faster. For the third quarter, the company expects revenue of approximately $982 million, indicating growth of 25%.
That figure is heavily influenced by a computer crash that CrowdStrike contributed to in late July, when a failed update crashed millions of devices. However, CrowdStrike CEO George Kurtz stated at his Fal.Con conference that pipeline production has returned to normal, so the effect of this crash on business was fairly minimal. As a result, I expect CrowdStrike will likely exceed revenue expectations.
So you have two companies that are both growing at a strong pace, at similar speeds and around similar revenue figures. Moreover, both companies are involved in huge growth industries. How do we decide between the two? Simple. Look at the ratings.
Palantir’s run-up has caused its valuation to rise above normal levels. It now trades for 55 times sales.
PLTR PS Ratio data according to YCharts
That’s more than double what you’ll pay for CrowdStrike, making it almost impossible to choose Palantir over CrowdStrike.
Palantir’s price tag is so high that it’s almost unjustifiable on its own in a vacuum. If you have other stocks that perform similarly and trade at half the price, then it becomes an easy stock to pass up.
While Palantir has a lot of tailwinds, so does CrowdStrike. Because CrowdStrike offers similar levels of growth, it’s a no-brainer choice over Palantir for me.
