Welcome to another edition of the SaaS Report, we’re unpacking Q2 results from ServiceNow and Pegasystems - and then turning our attention to one of the most surprising valuation stories in the public SaaS markets: Palantir.
Palantir’s market cap has exploded to $372B despite generating just $3.5B in ARR. That’s roughly 100× ARR - a multiple almost no SaaS company has ever touched.
To understand how we got here, we compare Palantir to four other companies that IPO’d in 2020: ZoomInfo, Asana, Snowflake, and BigCommerce.
But first, the Q2 snapshots.
Pegasystems: Growth Slowing, CAC Payback Stretching
Pegasystems is wrestling with a problem very few public SaaS companies can sustain: CAC payback of ~70 months.
Over the last 12 months, Pega added $108M in net new ARR, but spent $545M on S&M to get there.
There are improvements:
- Operating income up 33% to $17M
- 22% free cash flow margin
- ARR per employee: $240K
- S&M and R&D down slightly as a % of revenue
But the biggest concern is simple: growth.
Over the last three years, Pega’s ARR growth has swung between 30% and 9%, and the most recent quarter came in at the low end of that range. At ~$1.3B ARR, they need to push back into at least low-20s growth to justify a stronger multiple. Right now, they’re trading at 7.7× ARR.
ServiceNow: The Blueprint for Scaled, Efficient Growth
In contrast, ServiceNow continues to defy one of the core “rules” of SaaS:
As ARR grows, CAC payback typically gets worse.
Except… not for ServiceNow.
Highlights from Q2:
- $2.3B in net new ARR over 12 months
- 22% ARR growth, even at a $12.5B run rate
- 23-month CAC payback - the same as when they were doing just $2.5B in ARR
- Operating margins up from 9% → 11%
- All major OPEX categories down as % of revenue
- 16% free cash flow margin
- RPO up 28% to $23.9B
- 17× ARR valuation, market cap just north of $200B
ServiceNow is a rare case of a mega-cap SaaS company that keeps growing efficiently while maintaining discipline on spend. That discipline is exactly what Palantir would later leverage - but in a very different way.
Palantir: How a Once-Underwhelming IPO Turned Into a 100× ARR Rocketship
Six months ago, Palantir quietly turned into a meme stock - not because of social media hype, but because the numbers became too extreme to ignore.
- $372B market cap
- $3.5B ARR
- ~100× ARR multiple
But to understand how we got here, we need to rewind.
A Quick Origin Story
Palantir’s concept was born in the early 2000s when Peter Thiel realized that PayPal’s fraud-detection techniques could be applied to intelligence and counterterrorism. The founding team (Alex Karp, Nathan Gettings, Stephen Cohen, Joe Lonsdale) focused on a simple but powerful idea:
AI shouldn’t replace human analysts - it should augment them.
Their platform, Gotham, helped intelligence agencies combine noisy, unstructured data and spot patterns that humans alone would miss.
Eventually:
- Gotham gained traction in Iraq & Afghanistan
- Palantir expanded into law enforcement and defense
- Then into corporate use cases like supply-chain modeling, risk forecasting, and tariff response simulations
By 2020, they were ready for an IPO.
Comparing Palantir to Its 2020 IPO Cohort
To understand Palantir’s performance, we compare them to four SaaS companies that also went public in 2020:
- Snowflake
- ZoomInfo
- Asana
- BigCommerce
These four form our “control group.”
1. Capital Allocation: Palantir Was More Conservative Than Its Peers
R&D Spend
- Palantir rarely spent more than 25% of revenue on R&D
- Control group averaged 35%
Sales & Marketing
- Palantir averaged ~40% of revenue
- Control group averaged 51%
- Both reduced S&M over time as they scaled
Outcome: Stronger Margins
Because they spent less, Palantir posted:
- Higher operating margins
- Significantly higher free cash flow margins (25% vs. 6%)
- Over $2.3B in free cash flow generated since IPO
This fiscal conservatism laid the foundation for what came next.
2. Growth: Slow Post-IPO… Until the Reacceleration
Initially, Palantir lagged badly:
- Both groups started above 50% ARR growth
- By Q2 2023, Palantir had slowed to 13%
- Control group was still growing almost 2× faster
Then everything flipped.
The Inflection
Beginning Q2 2023, Palantir’s growth reaccelerated for seven straight quarters, while the control group steadily declined into single-digit growth.
When nobody else is growing, the few who are get rewarded with massive multiples.
3. Rule of 40 & Rule of X: Palantir Breaks the Model
Rule of 40
Palantir trailed the cohort until mid-2023.
Then the lines diverged sharply.
- Q4 2024: Palantir Rule of 40 = 91
- Control group = 23
Rule of X
This metric amplifies growth by giving it a 2× multiplier.
- Q4 2024: Palantir Rule of X = 127
- Bessemer says 70 = “outstanding”
- Control group lagged far behind
By Rule of 40 / Rule of X standards, Palantir is operating at an elite level rarely seen in public SaaS.
4. Go-to-Market Efficiency: A Rare Decrease in CAC Payback
Most SaaS companies see CAC payback increase as ARR scales.
Palantir did the opposite.
Early Years
- Worse CAC payback than peers: 27 months vs. 21
Recent Performance
- Control group ballooned to 110 months in Q1 2024
- Palantir improved to 12 months in Q1 2025
To put that in context:
Company
CAC Payback at ~$1B ARR
CAC Payback at ~$3.5B ARR
HubSpot
20 months
35 months
CrowdStrike
13 months
21 months
Atlassian
10 months
15 months
Palantir
27 months
12 months
This almost never happens.
It indicates Palantir is scaling revenue dramatically faster than headcount or S&M investment.
5. ARR per Employee: Best-in-Class Efficiency
Palantir dominates this metric:
- Now generating ~$1M ARR per employee
- The cohort hasn’t come close at any point
- Inflection began around Q3 2022, during the broader SaaS growth slowdown
This is exactly what investors look for when growth tightens across the landscape.
So… Does This Justify a 100× ARR Multiple?
Probably not.
But here’s the context:
- Palantir market cap: ~$372B
- Salesforce market cap: ~$250B
- Salesforce ARR: $40B
- Palantir ARR: $3.5B
Palantir has 1/10th the ARR and $100B more value.
Salesforce is growing around 9%.
Palantir is growing significantly faster and improving efficiency at the same time.
Investors are paying not for what Palantir is, but what they believe Palantir might become:
A foundational AI decision-making platform spanning governments and enterprises.
Final Takeaway
If you evaluated Palantir in 2021, you would’ve seen:
- Slowing growth
- Weak go-to-market efficiency
- Conservative spending
- Underwhelming relative performance
But from late 2022 onward, Palantir flipped every major metric:
- Growth reaccelerated
- CAC payback improved
- Free cash flow surged
- Efficiency skyrocketed
- And they outpaced their entire IPO cohort
The result is one of the most dramatic valuation stories in modern SaaS.
Is 100× ARR sustainable?
Almost certainly not.
But it’s much easier to understand when you look at the momentum behind the numbers - and the vacuum of growth everywhere else in public SaaS.
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