Palantir (PLTR) Q3 FY26 Earnings Call Transcript

Ana Soro00:00

Good afternoon. I'm Ana Soro from Palantir's finance team, and I'd like to welcome you to our third quarter 2026 earnings call. We'll be discussing the results announced in our press release issued after the market close and posted on our investor relations website.

Ana Soro00:21

During the call, we will make statements regarding our business that may be considered forward looking within applicable securities laws, including statements regarding our fourth quarter and fiscal 2026 results, management's expectations for our future financial and operational performance, which does not constitute formal guidance unless indicated as such in the accompanying written materials, and other statements regarding our plans, prospects, expectations, goals, and aspirations.

Ana Soro00:36

These statements are not promises or guarantees and are subject to risks and uncertainties. which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed after the market closed today and in our SEC filings.

Ana Soro01:01

We undertake no obligation to update forward looking statements except as required by law. Further during the course of today's call we will refer to certain adjusted financial measures. These non-GAAP financial measures should be considered in addition to not as a substitute for or in isolation from GAAP measures. additional information about these non-GAAP measures including reconciliation of non-GAAP to comparable GAAP measures is included in our press release and investor presentation provided today.

Ana Soro01:14

Our press release investor presentation and other earnings materials are available on our investor relations website at investors.palantir.com. Over the course of the call, we will refer to various growth rates when discussing our business.

Ana Soro01:30

These rates reflect year-over-year comparisons unless otherwise stated. Joining me on today's call are Alex Karp, Chief Executive Officer, Shyam Sankar, Chief Technology Officer, Dave Glazer, Chief Financial Officer, and Ryan Taylor, Chief Revenue Officer and Chief Legal Officer.

Ana Soro01:33

I'll now turn it over to Ryan to start the call.

Ryan Taylor01:56

Humanity is facing world historic crossroads in how it chooses to deal with AI, and through it all, our genre defining technology has led the way redefining the industry. We've been shaping the AI revolution from its start, and despite being only at the very beginning of the sovereign AI revolution, we already see how it is transforming the size of the market.

Ryan Taylor02:05

We achieved revenue growth of 96% year over year and 20% sequentially. the highest growth rates we've ever delivered as a public company.

Ryan Taylor02:18

These results are the continued financial expression of the transformational impact we're delivering for our customers, which is also evident in the depth of our customer relationships.

Ryan Taylor02:28

The third quarter average trailing 12 month revenue from our top 20 20 customers increased 76% year over year to $146 million per customer.

Ryan Taylor02:31

Our US business is in overdrive.

Ryan Taylor02:43

We We brought in 1.9 billion dollars in US revenue which grew 119% year over year and 23% sequentially representing 84% of our total revenue.

Ryan Taylor02:56

This is led by our US commercial business which grew 148% year over year and 29% sequentially and surpassed our US government business revenue in quarter for the first time.

Ryan Taylor03:10

In US commercial the average trailing 12 month revenue per customer grew 88% year over year and 20% sequentially. The US continues to be the epicenter of the AI revolution.

Ryan Taylor03:28

I won't repeat what I said last quarter, because it has become self-evident in our unparalleled results. Two years ago, we led the way with our commoditized cognition thesis. And today, the market is only beginning to recognize the full force of sovereign AI.

Ryan Taylor03:42

It's pervasive in the conversations I'm having with customers and undeniable in the results they've shared. The COO of Optum Serve highlighted, quote, sovereignty doesn't mean that we have to build everything ourselves.

Ryan Taylor03:59

What it does mean though is protecting what differentiates us while retaining the ability to evolve to adapt and to scale our solutions as our customers needs change and they change often. It means knowing where the right partner can help us move faster.

Ryan Taylor04:14

L3 Harris noted that by fine tuning open source models on its own data a sovereign model outperformed the frontier model it had been using in less than 48 hours and cut costs by 95% in preliminary results.

Ryan Taylor04:37

NVIDIA reported that by evaluating and post training its open models it was able to get its smallest most efficient model to outperform its largest model by a large gap and can now retrain that model on just a single GPU in a couple of hours enabling them to retrain anytime they have data to improve the decision intelligence.

Ryan Taylor04:55

They stated quote we captured our alpha and we trained it into a model we couldn't have started this process until we built the workflows in Palantir. and our customers are choosing Palantir and our sovereign AI to transform their organizations at a furious pace.

Ryan Taylor05:08

An industrial materials company piloted a nearly three million dollar engagement in Q2 2026 before converting to a 29 million dollar ACV deal last quarter.

Ryan Taylor05:18

A global athletic company converted a 1.6 million dollar pilot that began in Q1 2026 into an approximately 21 million dollar ACV deal last quarter.

Ryan Taylor05:38

A global home appliance company converted a 1 million dollar pilot that began in Q2 2026 into a 3 million dollar ACV deal within the same quarter then expanded nearly five fold to a 15 million dollar ACV deal in Q3 across commercial finance and supply chain workflows.

Ryan Taylor05:38

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Ryan Taylor05:49

After an agent camp in Q2 2026 an apparel company signed a 2.5 million dollar pilot then last quarter they converted to an 11.5 5 million dollar ACV deal.

Ryan Taylor05:56

These commitments are downstream of the measurable impact we're delivering with our customers.

Ryan Taylor06:12

With Palantir Sovereign AI, McCarthy Building Companies will save 30,000 hours annually by using post-trained Nematron to help turn complex project requirements into contract language that allocates risk and clearly defines subcontractor obligations.

Ryan Taylor06:28

Tampa General is deploying Sovereign AI to keep sensitive data and model processing local while enforcing its own risk and privacy standards for LLM traffic and supporting the granular controls Tampa Tampa General wants to define for itself.

Ryan Taylor06:40

Using fine tuned and post trained Nematron to achieve this outcome together we also improve model performance by 7% and reduce latency by 22x.

Ryan Taylor06:54

Turning to our US government business revenue grew 96% year over year and 18% sequentially demonstrating continued extraordinary impact across civil and defense.

Ryan Taylor07:22

With Maven as our foundational work. In Q3, the army awarded Palantir a prime agreement to produce eight Titan systems. and last quarter, FAA highlighted the impact of our work together stating quote that shift from scattered data to an embedded ontology is what changes the game this is a modernization and operational form changing how safety work gets done and noted that the work they can do now would require hundreds of analysts without Palantir.

Ryan Taylor07:35

As I reflect on our results I see the furious pace continuing unabated. I'm invigorated unlike ever before by the ambition I'm hearing from our customers and their demand for sovereign AI.

Ryan Taylor07:47

A revolution we should remember is barely one quarter old. As extraordinary as these results are they are only the opening chapter of sovereign AI. I'll now turn it over to Shyam.

Shyam Sankar08:03

Thanks, Ryan. Palantir is obsessed with turning tokens into economic value. It's clear that the vast majority of economically valuable problems that LLMs can solve can be solved with intelligence at or below the frontier.

Shyam Sankar08:20

So what's preventing this from happening? On one end, you have the model makers who can't conceive of solving any problem except through model improvement. So they aren't even trying. And on the other end, you have the hard work of diffusion, which sounds passive, but is anything but.

Shyam Sankar08:34

All the value comes from the elegant integration of AI, software, and humans. And this requires not a harness for the model, but something closer to a harness for the enterprise, which is exactly what AIP is.

Shyam Sankar08:47

Most profoundly, the conceit that the labs have wrong is the belief that the atomic unit of the enterprise is the individual knowledge worker. It is not. The fundamental unit of the enterprise is the workflow.

Shyam Sankar09:01

You can make any set of workers more productive and generate no actual ROI. For some things, like coding, the knowledge worker is the workflow, so there's perfect product market fit. But for the vast majority of the enterprise, it is not.

Shyam Sankar09:11

Given this, it is incredibly valuable that AIP implements enterprise workflows and is able to bring AI to it in a way that generates objective, quantifiable value.

Shyam Sankar09:20

For example, page 209 of Anthropic's S1 talks about AIG's automation of insurance underwriting processes for complex commercial lines of business.

Shyam Sankar09:34

That entire workflow and the elegant application of AI, software, and humans runs in AIP and was implemented by Palantir and AIG. We are the diffusion layer not just of choice but of necessity.

Shyam Sankar09:48

There's a clear pattern emerging amongst our customers who are most successful at getting value from AI. They have enormous ambition. Their goal is not something lame like OPEX reduction, it's market domination.

Shyam Sankar10:02

And the opposite is true customers that struggle the most are narrowly focused on reducing costs. AI is a new type of intelligence simply trying to shoehorn it to replacing the human misses the moment completely.

Shyam Sankar10:21

The error of conflating human and machine intelligence locks you into a poorly chosen goal, one that limits your ambition and still remains out of reach. Instead, we're attacking all the work the enterprise knows it should be doing but historically lacked the economic resources or capabilities to take on.

Shyam Sankar10:33

In Agent Swarm watching each patient in the ICU ward to help clinicians avoid potential signs of sepsis earlier and improve patient outcomes. In Agent Swarm per Wellhead in the Permian Basin to maximize production.

Shyam Sankar10:48

In Agent Swarm for every customer of our customer to drive growth. This is not about doing the same thing cheaper. It's about defining the productive work that goes beyond yesterday's frontier and capturing and compounding the new economic value it creates.

Shyam Sankar11:01

And doing so with sovereign AI, the examples are everywhere now. It's clear that post training on your specific operational data in ontology enables better than frontier performance on weights you control. control, protecting your alpha.

Shyam Sankar11:14

Yes, it's cheaper, but the dominant variable is that more use cases can actually get to the threshold of viability for machine intelligence to generate economic value when elegantly integrated into your enterprise.

Shyam Sankar11:42

And our product investments in AIP to create a closed loop model factory are making this easy and fast. The specific post trained model is a commodity item. The compounding value is in the post training pipeline that is constantly fed from your operational exhaust captured in the ontology that drives automated post training runs model checkpoints evaluations and deployment across yesterday's today's and tomorrow's open weight ecosystem.

Shyam Sankar11:56

Our new feature of auto research and continued investment in AIP Evolve push us closer and closer to an automated loop to build deploy and evaluate intelligence continuously against ROI.

Shyam Sankar12:08

In AIP and sovereign AI the Pareto optimal frontier is no longer an unachievable academic aspiration it is a simple function call and one we can invoke automatically on your behalf.

Shyam Sankar12:27

At a recent Paycom exercise, we deployed a 30 billion parameter post trained model into space, weight, power, cooling constrained compute ready for the disconnected fight with superior task specific performance than GPT 5 6 Sol a three trillion parameter model.

Shyam Sankar12:45

L3 Harris realized 95% cost reduction with sovereign AI. McCarthy will save 30,000 hours a year on subcontractor drafting achieving better than frontier performance for RFI classification and subcontractor drafting on a post trained Nematron 4 4 billion parameter model.

Shyam Sankar12:51

Where again the real value is the substantially greater number of demand events they can process now.

Shyam Sankar13:32

Maven continues to deliver for the Joint Force exceeding 100,000 users Maven is now available to all of the services beyond just the combatant commands and many combat support agencies we just concluded a Maven hackathon 46 teams across the Joint Force participated many amazing projects were built by our 25,000 strong builder community the winning two teams were both army teams one building an edge planning and simulation capability for force protection and a second place an incredible platform to analyze drone incursions to drive force protection insights and we continue to feel demand for Maven down to the tactical edge in disconnected environments ashore and afloat.

Shyam Sankar13:54

We have seen incredible success with DORA disconnected ontology resilient architecture including in the army's jailbreak effort DORA is an embedded compute device that brings Maven's capabilities to disconnected operations using AIFDE service members can build read write integrations with legacy sensors and effectors and bring them online in hours entirely unassisted.

Shyam Sankar13:58

With that I'll turn it over to Dave.

Prepared remarks

David Glazer14:19

Thanks, Shyam. We had an outstanding third quarter. We delivered our highest ever reported year-over-year revenue growth rate of 96% and our highest ever reported sequential revenue growth rate of 20%. Quarterly revenue crossed the $2 billion mark for the first time and we surpassed additional billion dollar milestones in commercial revenue government revenue and GAAP operating income.

David Glazer14:37

Revenue in our US business accelerated yet again growing 119% year over year and 23% sequentially our US commercial business grew 148% year over year and accelerated to 29% growth sequentially and our US government business grew 96% year over year and 18% 18% sequentially.

David Glazer14:50

Demand for our sovereign AI offering is accelerating our US commercial momentum helping to make this our first ever quarter that US commercial revenue eclipsed US government revenue a critical milestone in the history of our company.

David Glazer15:13

On top of this we are raising our full year US commercial revenue guidance to in excess of 3.559 billion representing a growth rate of at least 143%. We're also raising our full year 2026 revenue guidance midpoint to 8.532 billion representing 91% growth 91% growth year over year a nine point increase over our full year 2026 revenue 2026 revenue guidance from last quarter.

David Glazer15:41

Turning to our global top line results third quarter revenue grew 96% year over year and 20% sequentially to 2.313 billion third quarter US revenue grew 119% year over year and 23% sequentially to 1.937 billion revenue from our largest customers continues to expand third quarter trailing 12 month revenue from our top 20 customers increased 76% year over year to 146 million per customer.

David Glazer15:54

Now moving to our commercial segment. Third quarter commercial revenue grew 113% year over year and 24% sequentially to 1.168 billion crossing the billion dollar mark for the first time.

David Glazer16:02

We closed 1.652 billion in commercial TCV bookings in the third quarter representing 17% growth year over year.

David Glazer16:33

Our AI platform continues to dominate the US markets as the only real choice for operationalizing LLMs LLMs while still giving customers full control over the data logic actions and security of their enterprise third quarter US commercial revenue grew 148% year over year and accelerated sequentially to 29% quarter over quarter totaling 984 million US commercial revenue was 397 million in the third quarter of 2025 meaning it increased by 587 million in just one year.

David Glazer16:57

We closed 1.463 billion of US commercial TCV CV bookings representing growth of 11% year over the past 12 months we closed 6.114 billion of US commercial TCV bookings a 62% increase from the prior 12 months highlighting the accelerating demand for AI that creates real operational value while also moving power away from the labs and back into your enterprise.

David Glazer17:18

Total remaining deal value in our US commercial business grew 79% year over year and 4% sequentially. We believe sovereign AI is the latest and largest tech revolution of our generation. We signed multiple eight figure deals in the quarter that were shorter in duration than usual as customers rapidly adopted initial sovereign AI capabilities in their enterprise.

David Glazer17:29

It's important to remember that the sovereign AI revolution is only one quarter old as we continue to deliver value with sovereign AI over time we expect both the duration and size of these contracts to increase.

David Glazer17:36

Our US commercial customer account grew to 686 customers reflecting growth of 29% year over year and 5% sequentially.

David Glazer17:53

Third quarter international commercial revenue grew 21% year over year and 1% sequentially to 184 million. revenue from strategic commercial contracts was approximately 400,000 for the quarter representing less than 0.02% of overall revenue. revenue.

David Glazer18:05

We continue to expect revenue from these contracts to be less than $500,000 in the fourth quarter and we anticipate no further revenue from these contracts beyond the fourth quarter of this year. Shifting to our government segment.

David Glazer18:22

Third quarter government revenue grew 81% year over year and 16% sequentially to 1.146 billion crossing the billion dollar mark for the first time. Third quarter US government revenue grew 96% year over year and 18% sequentially to 953 million.

David Glazer18:29

This growth was driven by continued execution in existing programs and new awards reflecting the growing demand for our AI platform in government.

David Glazer18:37

Third quarter international government revenue grew 31% year over year and 6% sequentially to 192 million.

David Glazer18:48

We closed 2.918 billion of TCV bookings up 6% year over year. Net dollar retention was 165% an increase of 800 basis points from last quarter.

David Glazer19:03

We ended the third quarter with 13.4 billion in total remaining deal value an increase of 55% year over year and 2% sequentially and 4.9 billion in remaining performance obligations an increase of 88% year over year and flat sequentially.

David Glazer19:17

As a reminder RPO is primarily comprised of our commercial business as it does not take into account contracts with an initial term of less than 12 months and contractual obligations that fall beyond termination for convenience clauses both of which are common in most of our government business.

David Glazer19:49

Turning to margin and expense, adjusted gross margin, which excludes stock based compensation expense was 85% 85% for the quarter. Adjusted income from operations which excludes stock based compensation expense and related employer payroll taxes was 1.427 billion in the third quarter representing adjusted operating margin of 62%. Q3 adjusted expense was 887 million up 20% sequentially and 53% 53% year over year primarily driven by the continued investment in our AI platform and technical hiring as we welcomed our latest class of new grad hires.

David Glazer19:59

We remain committed to investing in the most elite technical talent as well as R&D for our product pipeline and sovereign AI efforts all while delivering on our goals of sustained gap profitability.

David Glazer20:09

Third quarter GAAP operating income was 1.085 billion representing a 47% margin and surpassing the billion dollar mark for the first time.

David Glazer20:30

Third quarter GAAP net income was 1.128 billion representing a 49% margin. Net income has increased nearly eight fold over the last 24 months from 144 million in the third quarter of 2024. Third quarter stock based compensation expense was 319 million and equity related employer payroll tax expense was 23 million.

David Glazer20:50

Third quarter GAAP earnings per share was 44 cents third quarter adjusted earnings per share was 44 cents. Additionally our combined revenue growth and adjusted operating margin accelerated to 158% in the third quarter a three point increase to our rule of 40 score from the prior quarter and our 13th consecutive quarter of an expanding rule of 40 score

David Glazer22:04

Turning to our cash flow in the third quarter we generated 1.205 billion in cash from operations and 1.216 billion in adjusted free cash flow representando margins of 52 and 52 and 53% respectively we ended the quarter with 10.4 billion in cash equivalents and US Treasury securities now turning to our outlook for Q4 2026 we expect revenue of between 2.649 and 2.653 billion and adjusted income from operations of between 1.640 and 1.644 billion for full year 2026 we are raising our revenue guidance to between 8.530 and 8.534 billion we're raising our US commercial revenue guidance to in excess of 3.559 billion representing growth rate of at least 143% we are raising our adjusted income from operations guidance to between 5.245 and 5.249 billion we're raising our adjusted free cash flow guidance to between 4.8 and 5 billion and we continue to expect gap operating income and net income in each quarter of this year with that I'll turn it over to Alex for a few remarks and then Anna will kick off the Q&A.

Alex Karp28:32

Um welcome to our earnings call and you know I think for many many years our earnings calls were really about our earnings now it is the focal point of tech society and general trends and I think many if not most people who are watching this and it is by far the most watched earnings call in the world it's the one where people come to figure out what's going on the ground floor and given that AI and sovereign AI is changing the universe in our case for tremendous good and is showing up in our numbers people really want to have a sense of well what is actually happening in the world politically sociologically anthropologically and of course financially so you know given that demand in an interest in Palantir and the reality that this moment has become a real focal point of understanding and quite frankly many investors watching this are watching it to figure out what's going on with their investments and not even primarily Palantir and so there's this larger question of what does it mean to have a business that was built around the what we believed and believe now is the most important mission in the world supporting our warfighters bringing them home where even as much even a year ago two years ago that people even involved inside Palantir viewed the core value of our business economically as Glazer would look at it in quite frankly you know in a very helpful way he's the force of greed you know Glazer's view of our business was could you talk a little more about commercial um over the past year past couple years and in this quarter our commercial business eclipsed our government business and in fact the market value of that is probably justifies our current valuation given we're growing at 90 we our aggregate business growing at 96% the juggernaut of US commercial I mean these numbers are so far outside the bounds of what you could I mean outside the bounds of what even the most optimistic people could think a business like ours could do while maintaining a way of going to market that it is completely sui generis we have products that are unique we have ways of going to the market they're unique we were the leader of a revolution that was in front of us but none of us really were able to put our name on the sovereign revolution meaning people need to understand how AI can create value how you can create value out of tokens how you can keep the value of your own alpha how is it not transferred to anyone else and how can you expand it that revolution of course is happening in America and then these out of bounds results of which we're a metaphor really show you the future is becoming the present is now you see it in Europe which you know I'm spend half my life and at this point we should kind of avoid talking about it because of what's going on and it doesn't help to just you know stamp on them but you see it across America you see it reaction to AI you see the polarization politically it's because all the value in the market is actually moving to the vehicles in this case Palantir and really very few others Anthropic OpenAI us others that where you can actually make a claim that there is some value creation Again, it's so extreme that a business that was viewed as a nice to have part of our business as late as three years ago is now the dominant part of our business that business grew 29% quarter on quarter it's almost at 150% growth and it's dragging our US growth number over 100% these are just bomb and we did this while attacking the market the way we attack it very few salespeople very an impossible way to understand how we're capturing this juggernaut unless you view it as a completely new and different moment and so when people are watching this like what is happening in the market what is happening in our society it really is the case that that the playbook the products the way of going to market do not work in most cases but the things that do just spring alive and you know our somewhat crazy aspiration to take the whole market doesn't look that crazy right now you know and you know we believe at this company and many of the people watching it we do not only have a financial reason for taking the whole market which Glazer is salivating at we on the mission side we believe we have a mission reason for taking the market and that mission reason is we support your alpha we support your sovereignty we've done this for over 20 years we support the warfighter we are delighted that we can support the warfighter even more because we're making so much money but we believe we have a moral imperative to be the dominant player in our industry broadly defined including all AI applications and the use of model open and closed especially training open weight models and that moral imperative drives every part of our business the interesting thing about the internal dynamic of our business it's not only that the sum of the parts in our business is stronger that's obvious 96% growth look at our rule of 40 it's 158 it's almost like jaw dropping but we the parts of our business the individual parts the parts that that the people at this company are running those parts are stronger than they were before every part and that that's what you're seeing in this numbers and arguably for most people watching that that's what you're seeing in broader society and this move to the from the future to the present is the reason why many of the classical approaches to business there was an idea they were going to fail in five years that doesn't work you have to execute now and in the present and this company Palantir and everyone involved and all the people watching this who are on our side of which there are many many people are part of that movement and that's why we're so really really happy and honestly quite optimistic about the future especially in the US.

Questions and answers

Ana Soro28:42

Thanks, Alex. Our first question is from Dan with Yorkville Ives. Dan, please turn on your camera and then you'll receive a prompt to unmute your line.

Dan Ives29:15

Yeah, thanks. And obviously just another phenomenal quarter. So my question is with the sovereignty AI boot camps, I mean, I've been to a few, it seems like they're really becoming huge for converting customers. Can you just walk through like Alex, like you talk to so many of these customers, like do they come into a boot camp just they're not they're trying to understand their AI path and then they leave and they're actually a customer. Can you just walk through like just from your perspective?

Alex Karp31:29

Well you know I mean what's really shifted on the front line is like it there used to be this long walk up to people like talking to us and then you do a pilot and then you try to get a long pilot and then you kind of lock that in because it the same way you lock in like hire all these salespeople so that the market believes you're going to have sales kind of thing now it's much more you know people are it's super heterogeneous so some people everybody basically comes in on the spectrum of what I have doesn't work now and I've heard what you have does work that's usually where it starts they also strongly believe and are quite tired of what they believe the reality is my IP is in danger and I'm getting no value it's like and this is when we started talking about sovereignty this was kind of an un this was a something that was being expressed they felt but they didn't know how to articulate now it's something they articulate in there and they're they they've gone from anger to action like it's like you know it's like they've gone from thinking hey I'm not in a great marriage to I'm I'm at the divorce and like they come and then what's very special now is they're surrounded by people who've had the same journey and the timeline from interaction to them buying pilots or going into production is completely shifted and so what like Ryan Ryan and I are seeing on the front line and commercial is you know this much quicker interaction much quicker to deployment shorter duration of the contract but then an ability to expand that contract dramatically because as soon as you go in there and you show them that you can for example train open weight models in our ontology those models are valuable and you have beyond frontier capacity without losing the alpha you just are hooked what we have to do internally is figure out how to reresource our company to focus exclusively on those people because we don't have even the bandwidth to do that so but that's because like every single time we go into the conference like in the past you would be we go into conference and people are like warm leads turn into hot leads this is like first date into bed kind of thing you know Maybe that's not the right metaphor for this, but it's like it's a very different jam.

Alex Karp31:51

It's like we've gone this way. We've gone from being the most attractive person in the physics department to being the captain of the football team. Kind of thing. I mean not that I did that but this is like a completely different jam of like what's going on and then it's also different on our end because we know we can deliver on use cases no one else can deliver on.

Alex Karp34:26

So like even today we're going over use case after use case with like a super like one of the most important companies and I'm going to go see them and basically it's like I'm going to instead of saying hey get which is like let's just get started you have this crucial problem for your business we know we can deliver on this in weeks this will change the trajectory of your business and it's in a weird way it's much much closer to what we were doing in the beginning in the US government where we're like hey we're just going to get started we knew we could prove it with PG and then we but it's like at a much more massive scale so instead of being like 250k it's like 25 million dollars to start and honestly the general vibe is if this actually works it's worth infinite value and it will work and quite frankly I do not see how other offerings are going to work because this is both product and artistry it's not just that's why these numbers are so bombastic it's not like some static like when Sham's on the front line doing implementations or Ryan is is structuring these I mean Ryan was so busy the last couple days of last quarter he couldn't get out of his car we were like we're I was about to send over a bottle so he could like you know take care of nature it's like it was like it's like that on the front line like and I'm not even I'm not exaggerating it's like I'm like Ryan was on his way to work and like he had to pull over he drives a fancy car I mean look at that but you know it's you know but he literally had to pull over and that's just what's going on and it but again I I know like it the primary focus of your interest here is financial but there's the flip side the other stuff is not working that's part of it's not just that our thing is unique it's there's a very strong sense in the market that these other approaches fake deploy codes token raw usage lightweight companies reselling tokens software companies that are reselling tokens and accounts as revenue people are just tired of it and I'll tell you last not least the taste of the market is shifting like people really do grow to like what works I mean look at the success in you in the Department of War you know it's like that was it's we shifted the taste that's what's happening in US comm that's what's explaining the numbers and that's what if you like people watching this you should come to one of our you know AIP sovereign you know it's a little bit like a rock concert

Ana Soro34:37

Thank you. Our next question is from Gil with DA Davidson. Gil, please turn on your camera and then you'll receive a prompt to unmute your line.

Gil Luria34:57

Thank you. Good afternoon. I want to build on that conversation you had with Dan. You talked to him about one type of CEO, the one that comes to you with an urgency around sovereignty. But but as reading the Anthropic S1 will tell us about half of their customers work directly with Anthropic.

Gil Luria35:18

So when you have a C which means there's a lot of CEOs that haven't gotten the message to your point, you're in the first inning of this conversation. When you get a CEO that's still unconvinced, what kind of analogies and metaphors can you use to help them understand the importance of this diffusion layer orchestration harnesses coming from you and not directly from the lab?

Gil Luria35:22

What kind of examples do you have to provide them to understand the risk?

Alex Karp37:55

There's there's two parts to your question which is like you know the person who's not convinced or not yet convinced and then what do we do the weird thing here though is we really cannot satiate demand so this is a market that is growing so rapidly we don't need the people who aren't convinced we really don't and by the way and again I I say this every time Dario is someone I get along very well with I think he's one of the most important business people of my generation if not multiple generations they are also selling our product because people interact with them and again some people want that approach but a lot of people are super concerned about their alpha being transferred to them and the results even the results they talk about are often already in our application layer we work very effectively with Anthropic in the Department of War and at AIG and all over the place um but again the primary the that what they are doing is increasing the size of the market what we're doing is servicing the market that's gotten real and we are actually in a symbiotic relationship with them commercially because they're growing a market it's probably much much bigger than it will be it is today and we're taking advantage of the market where it really where you really need delivery where delivery also includes now if there is somebody we don't we really do convincing in the government space like we've been on the front line like certain agencies didn't want to adopt and we knew the warfighters would die if they didn't adopt so we went to convince them in commercial our real approach is you know hey enjoy the one you're with till you just you find out it's not the one you want you know there are very very very few times where we're trying to go and compete and take their customer away it really is not happening and conversely you know once you go Palantir you don't go back and that's just that's how it is and you see it in our numbers which is so it's this is a very different thing I I don't know at what point we become competitive with each other but at this point in the US the market for us is insatiable it's and it's insatiable and growing you know there's two ways to look at our numbers um one is to say we are just sublime at what we do another way is to say we're very unique in the market is exploding around us I'm much more in the latter camp

Alex Karp38:58

Like I don't we are a creative colony. We're not perfect. But the market is exploding around us and they are helping it explode and the only area where we do anything that looks competitive is we are we're spending a lot of time educating clients partners that may never that are non-partners around the risks of using closed models without an application layer that's the one thing we do do actively so but we're not really saying hey you're going to you know the value creation people know we own this certainly in industry I think less on Wall Street actually honestly I think on Wall Street I don't mean you but I think really what happened on Wall Street is everybody invested in these firms early bless you guys it's hard to see the reality when you're getting rich on something that's not actually working the way you think it is and the reality is though in industry people realize when it gets real you need us and that market is much larger than we can service

Ana Soro39:07

Thank you. Our last question is from Brad with Deutsche Bank. Brad, please turn on your camera and then you'll receive a prompt to unmute your line.

Unidentified speaker39:21

Great. Thanks so much for including me. Congrats on another rocket ship quarter. Alex, in your shareholder letter, you said that you see Palantir as the pioneers of a genuine and viable anti-war movement.

Unidentified speaker39:25

Can you expand on what that means and what it might mean for your government business?

Alex Karp41:46

Well, you know one of and I'll let Shyam talk about this you You know it I'll go back to the beginning of our Palantir PG you know we and we built products that would protect civil liberties and stop terrorism for the very simple reason that you don't want to do one or the other if you don't stop terrorism you're going to get a radical fringe on the right if you stop terrorism without rights none of us want that okay you could say it's an anti-terror product or you could say it's a product for social cohesion it's this product our products are built to avoid war meaning the adversary knows that they will have such pain inflicted upon them that in fact it's not worth going to war and also to create social cohesion because we're going to bring back our troops healthier safer non damaged and that makes our society much more effective and I would say as a person not as a not as like Palantir I I grew up as a lefty I don't actually like war I want to avoid war I do not support wars sometimes they are necessary and when they are necessary American as allies need the very very very best tools and we have competitors adversaries and enemies out there they need to know our stuff works the way to stop a war is for them to know these things work and also you know the part of the problem with that we've had in a AI discussion in this country is we do have a rival an adversary on the battlefield I happen to respect their culture quite a bit China but it is us or them and they have a dynamic interesting super high IQ IQ scaled culture that is doing exceedingly well at AI and we've got to make sure we're the leaders and somehow we have to drag our European and other allies with us which is going to be hard because they're going to have to also learn how these things work and that probably means a real interaction with the leader of the sovereign movement not some fake bureaucratic thing made up by people have no idea what they're talking about and think you can regulate these things like a telecom industry when in fact this is galvanizing a new transformative technology that is transferring every part of society and transferring our numbers and everything it touches

Ana Soro41:52

Thank you Alex as always we have a lot of individual investors

Alex Karp41:54

Somebody else has gotta talk

Alex Karp41:56

Is there anything anyone would like to say before you

Alex Karp41:59

You guys can say a couple words Sean would you like to say

Shyam Sankar43:07

Well I mean you spoke about deterrence really well I guess I would just add that of course the objective is to deter conflict deterrence is not something you accomplish by hope you actually have to build it brick by brick and so on one end in the foxhole that's about having a capability that's 10 times 100 times better than your adversary should they choose to fight they're going to lose and therefore they should not choose to fight and on the other end it comes down to the factory floor you know deterring conflict as we've seen with Russia and Ukraine is is really about your ability to produce the materiel and I I we are in a period where we need to reinvent how we do production we've gone through 30 40 years of essentially deindustrialization in the nation beyond just their defense industrial base and the work that we're doing with War Machine and working with commercial and private and public sector companies in order to enable production using a modern American manufacturing stack. These are two parts of the same coin here. And I think it comes down to yes, freedom driven through the foxhole, but also prosperity.

Shyam Sankar43:10

The growth of the American economy on the back of that.

Alex Karp43:13

You want to say something? Would you like to talk about your greed?

Ryan Taylor43:38

I'll just add, you know, the sovereign AI revolution we launched this last quarter and the felt version on the ground is is and what we're seeing at sovereign AI boot camps when we actually show and don't tell is the momentum and the urgency of customers they get it and see it adopting quickly moving with urgency because they realize how much it matters and we're feeling that on the ground and we're at the very beginning of this and we only see that continuing and expanding from here.

Shyam Sankar44:57

And because I can't help myself, I'll say one more thing going back to Gil's question you know I I mentioned this earlier in my comments but it really is the case that I think one of the conceits that the labs don't have right and that perhaps that the customers who don't quite yet realize that the return is not there is that the atomic unit of the enterprise is not the knowledge worker you know you can make people more productive and generate no actual return on investment if you're measuring the inputs it can feel really good to see that productivity of the person you actually the atomic unit is the workflow and having a platform like AIP where you're already managing your supply chain or your SNOP or your key enterprise processes the exhaust of those processes then enable you to go through the post training loop to have a model that's better than frontier at that we give you the tools to elegantly integrate your people your AI and the software to actually drive objective quantifiable value against the workflow this is the compounding loop that the customers who are coming to us in the sovereign boot camps really understand just at our most recent DevCon down in Miami we had a customer who on their stack in production as a hack week project built a production ready model that's better than frontier for their use case in the 48 hours a single person in the 48 hours that was DevCon so the proof is everywhere on this

David Glazer45:18

And I guess to financial metrics to leave you with I'd say two years ago on net income and to today we've 8x our net income over the last two years which I am incredibly proud of as well as everything else that was said and also as we look at sort of this year to basically guide to almost $5 billion in cash flow for the full year is is I think something we all can be excited about

Alex Karp46:13

And to close I just you know the people who invested in us early many of them were investing their own money and would otherwise be called retail and many now and recently have reinvested in us you know the sovereign revolution is a metaphor for your interaction with Palantir and the fact that we've been able to help you and you've been able to help us in your own wealth creation and in our journey and that you've defended us against what obviously now look like ridiculously stupid and malicious incredibly hard to understand attacks is something that we will never forget and part of the delivery here part of what motivates me is helping to make sure we are fighting for you and quite frankly making sure that the people that made fun of you and made fun of us are suffering and I I'm very very proud of that and I'm very proud to have all of you along with us and thank you for that support

Operator46:15

Thank you. That concludes today's call.