Palantir Hits Roadblock In Germany After February Court Ruling, Expects Leeway

• German states Bavaria and North Rhine-Westphalia were reviewing the use of Palantir Technologies Inc (NYSE: PLTR) software over privacy concerns, the Financial Times reports.

• In February, Germany's Federal Constitutional Court ruled that laws allowing data mining by police forces infringed on individuals' privacy.

• The court ordered Hesse and Hamburg to begin revamping their use of software made by Palantir.

• The moves have dealt a blow to the $17 billion data analytics company, led by CEO Alex Karp and co-founded by Peter Thiel.

• Palantir is the frontrunner for a forthcoming £400 million data contract with the U.K.'s NHS.

• Palantir's other clients included the Danish police and the law enforcement agency Europol. German police forces have said they intend to continue using Palantir's software.

• Karp, a German speaker, said in a February earnings call that Europeans are "a lot less friendly to new innovations."

• "That felt to me like they're throwing in the towel on Europe," said Tyler Radke, a software equity analyst at Citi, about Karp's comments.

• Since Germany first deployed Palantir's Gotham software in 2017, the HessenDATA system has helped foil a 2018 Islamist terrorist attack and uncover a pedophile ring in 2020.

• But the constitutional court found that Gotham could subject innocent people with links to criminals to the police investigation.

• Hesse's police cannot conduct automated data analysis until its government has rewritten its legislation. The ruling also threatens Palantir's expansion to other states.

• Bavaria signed a €25 million framework agreement with Palantir in 2022. North Rhine-Westphalia signed a Palantir deal worth over €20 million in 2020.

• Activists elsewhere in Europe do not anticipate immediate repercussions beyond Germany.

• Palantir expects the ruling to reassure states that its tech can serve within the framework laid out by the constitutional court.

• In February, Palantir reported its first profitable quarter, during which sales grew faster on government business rather than revenue from the private sector, partly due to economic uncertainty.

• Price Action: PLTR shares traded lower by 0.39% at $7.66 in the premarket on the last check Friday.

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