Two great Software Platform Stocks Similar to Palantir (PLTR)

When it comes to cutting-edge software and data analytics, Palantir Technologies (NYSE: PLTR) is often front and center. But for many investors, it's important to consider alternative or complementary stocks in the same sector that may offer robust growth potential. As PLTR looks expensive (overvalued) now based on recent target prices from investment analysts. Before we start, it's worth understanding who PLTR's closest peers are. For defining close peers, you can use the Financial Modeling Prep's Peer API endpoint.

The endpoint returns the JSON response for PLTR and its peers looks like this:

[ {

"symbol": "PLTR",

"peersList": [

"PANW",

"ADBE",

"CRWD",

"SQ",

"SPLK",

"ZS",

"NET",

"MSFT",

"ORCL"

]}]

This list includes some of the most prominent and rapidly expanding software/platform names:

- PANW (Palo Alto Networks) - Cybersecurity

- ADBE (Adobe) - Creative and marketing software

- CRWD(CrowdStrike) - Endpoint security and threat intelligence

- SQ (Block, formerly Square) - Digital payments and point-of-sale solutions

- SPLK (Splunk) - Data analytics and monitoring

- ZS (Zscaler) - Cloud security

- NET (Cloudflare) - Web performance and security

- MSFT (Microsoft) - A global tech leader with multiple software platforms

- ORCL (Oracle) - Enterprise software and cloud solutions

Two great stocks worth considering is MSFT (Microsoft) and NET (Cloudflare)

While each of these peers has its merits, Microsoft (MSFT) and Cloudflare (NET) stand out for a few fundamental reasons:

1. Consistent Revenue Growth

MSFT revenue quarterly growth 2025 Q1 1.3%, 2024 Q4 4.6%, 2024 Q3 -0.2%, 2024 Q2 9.9%

NET revenue quarterly growth 2024 Q3 7%, 2024 Q2 5.9%, 2024 Q1 4.4%, 2023 Q4 8%

Microsoft's transition from a traditional software licensing model to a subscription-based model (think Office 365, Azure Cloud) has significantly boosted its recurring revenue streams. Revenue growth has been robust, with strong contributions from Azure's cloud services and Office 365.

Cloudflare's focus on internet security, performance, and reliability solutions has driven steady revenue growth. As a pioneer in edge computing, content delivery network (CDN) services, and DDoS protection, Cloudflare attracts both large enterprises and small businesses looking to enhance their digital infrastructure and security. This consistent uptrend in revenue showcases the company's ability to capitalize on the increasing demand for robust cloud-based services.

2. High Profit Margins

Microsoft boasts impressive profit margins, both gross margin (69%) and operating margin (46%), due to its scale and high-margin software/cloud businesses. This is critical for long-term sustainability and profitability.

Cloudflare boasts an impressive gross profit margin of 77%, indicating that its core services—such as CDN, DNS, Zero Trust security solutions, and application services—are highly valued by customers and command strong pricing power. However, the negative operating margin of 7% reflects the company's ongoing investments in research and development, marketing, and global expansion. While profitability at the operating level is not yet positive, Cloudflare's management has been focusing on scaling its business and believes that these investments will yield significant returns over time.

3. Strong Free Cash Flow (FCF)

MSFT quarterly FCF growth 2025 Q1 -17%, 2024 Q4 11%, 2024 Q3 129%, 2024 Q2 -55%

NET quarterly FCF growth NET 2024 Q3 18%, 2024 Q2 7.5%, 2024 Q1 -60%, 2023 Q4 160%

Free cash flow is often regarded as one of the best indicators of a company's financial health. Microsoft consistently generates billions in FCF each quarter, reinforcing its ability to invest in growth, fund strategic acquisitions, and return capital to shareholders.

Though Cloudflare has experienced occasional volatility in free cash flow growth—swinging from -60% to 160%—the general trend over the last several quarters shows improvement. This fluctuation can be attributed to significant capital expenditures aimed at bolstering its global network infrastructure and investing in new product lines. As Cloudflare continues to expand its customer base and streamline its operating expenses, it aims to sustain more predictable and positive FCF, which will support further innovation and market penetration.

4. Diverse Product Portfolio

From Windows OS to Office 365, Xbox gaming, LinkedIn, GitHub, and Azure Cloud, Microsoft maintains a diverse revenue base. This diversification helps balance potential downturns in one segment with growth in another, thus lowering risk.

Cloudflare also benefits from a broad range of services. Content Delivery Network (CDN): Ensures fast, reliable delivery of web content globally. Security Solutions: Provides DDoS mitigation, web application firewalls, and bot management to help protect online assets. Serverless Computing with Cloudflare Workers: Enables developers to run code on Cloudflare's edge network, reducing latency for end-users.

5. Robust Shareholder Returns

Microsoft has a history of providing shareholder value through dividends (0.83) and share buybacks. Cloudflare is not paying dividends. This combination appeals to investors looking for both growth and stability.

In contrast to Microsoft's higher degree of shareholder returns through dividends and buybacks, Cloudflare's strategy hinges on reinvestment. It concentrates capital on expanding its global network, growing its product suite, and capturing market share. For long-term, growth-oriented investors, Cloudflare's reinvestment strategy may appeal as it fuels future innovation, even though it delays immediate income distributions.

Key Fundamental Indicators

When selecting a winning stock in the software sector, investors can examine various fundamentals, including:

- Revenue and Earnings Growth: A steady upward trajectory in top-line (revenue) and bottom-line (earnings) growth.

- Gross Margin and Operating Margin: High margins indicate pricing power and operational efficiency.

- Return on Equity (ROE): Measures how effectively management uses shareholder equity to generate profits.

- Free Cash Flow (FCF): Signals a company's capacity to fund future growth, pay dividends, and handle unexpected costs.

- Debt-to-Equity Ratio: Helps assess financial leverage and stability.

How to Forecast Stock Trend and Price

Investors who want to learn more about predicting the future price and trend of stocks should check out this insightful Medium article. It delves into simple yet powerful tools (like moving averages and volume indicators) and explains how these can help determine when a stock is poised for a breakout or a pullback. Topics covered include:

- Using moving averages (MA) to spot trends

- Identifying support and resistance levels

- Incorporating technical indicators like RSI (Relative Strength Index)

By combining technical analysis (price action and volume) with fundamental analysis (cash flow, revenue growth, margins), investors can form a well-rounded view of a stock's potential performance.

Equity Selection and Fundamental Analysis

Meanwhile, if you want a more comprehensive strategy on how to pick great shares, Financial Modeling Prep's article provides a detailed approach. It covers:

1. Stock Screening: Identifying potential investments based on valuation metrics (P/E, P/B, EV/EBITDA).

2. Risk Management: Calculating possible portfolio loss and understanding the return ranges using the VAR and the Monte Carlo Simulation models.

3. Trade Execution: Optimizing the timing of your trades.

4. Asset Allocation: Building an efficient investment portfolio.

5. Portfolio Evaluation: Continuously monitoring performance, rebalancing positions, and assessing market changes.

Choosing the best software platform stock similar to Palantir involves both diligent fundamental analysis and a solid grasp of technical indicators. The peers list from Financial Modeling Prep's Stock Peers API highlights top-tier companies in cybersecurity, data analytics, and enterprise software. While many of these companies have stellar prospects, Microsoft (MSFT) and Cloudflare (NET) emerge as standout performers due to their consistent growth, high margins, strong free cash flow, and diversified product ecosystem. By merging quantitative analysis (financial ratios, cash flow models) with qualitative insight (industry trends, competitive landscape), you can build a strong foundation for consistently identifying winning software stocks.