Second-quarter revenue came in at $1.9bn ($1.8bn expected), up 93% year-over-year and 19% quarter-over-quarter. Performance was driven by its US businesses, with commercial up 149% and government up 90%.
Adjusted operating profit rose 157% to $1.2bn ($1.1bn expected). Adjusted free cash flow was $1.2bn, and net cash, including leases, was $9.0bn at period end.
For the coming quarter, Palantir expects revenue of around $2.2bn, with adjusted operating profit of around $1.3bn. For the full year, revenue is now expected to land around $8.2bn (previously around $7.7bn), with adjusted operating income of around $4.9bn.
The shares rose 15% in after-hours trading.
Our view
Palantir has delivered the kind of quarter that investors were demanding, and the market has rewarded exceptional growth. Profit expectations will need to move higher, and that’s largely why we saw such a positive reaction, rather than a material shift in sentiment.
The US commercial business was the standout, offering compelling evidence that demand for its AI platform continues to build. Customers are moving beyond initial projects and embedding the technology more deeply across their operations. The government business remains another powerful growth engine.
Palantir builds software to help businesses and government agencies analyse data and make better decisions. It has two underlying platforms: Gotham, which helps government agencies like the military and police, and Foundry, which is used by commercial customers across a range of industries.
Palantir’s software gathers and organises large amounts of data, making it easier to find patterns and predict future trends. One of its key features is the so-called ‘ontology framework’, which connects data, decisions and workflows so AI tools can operate with context, control and accountability.
AI has turbocharged demand and significantly improved Palantir's product value, with its AI Platform enabling the integration of large language models into live operations. Management argues that this is what separates useful AI from unreliable outputs, with examples across insurance, manufacturing, defence and customer service.
Once customers are ensnared in the Palantir world, it’s very hard to give up the data insights and get out of its web, making revenue very sticky. Retention rates are strong and improving, new deals are continuing to grow, and customer numbers are rising – though there remains a customer concentration risk.
Palantir’s approach to winning business looks different to most software companies. Rather than leaning on a huge sales machine, it uses a small sales team and forward-deployed engineers (FDEs), who work closely with customers to turn complex problems into working products - results suggest this is working.
Moving to the fundamentals: Revenue, profit and cash flows are all booming. The US market is the key driver, with commercial and government demand accelerating. Improving is international growth, an area we think is ripe for future growth; however, it remains well behind the US.
We continue to view Palantir as one of the strongest growth names within our software coverage. The earnings multiple has come down from last year’s extremes to a level we think can be supported if execution remains strong. The caveat is that expectations are still sky high, and results need to keep beating them to maintain that sentiment. Investors should expect more volatility than the average tech name.
Environmental, social and governance (ESG) risk
The technology sector is generally medium/low risk in terms of ESG, though some segments are more exposed, like Electronic Components (environmental risks) and data monetisers (social risks). Business ethics tend to be a material risk within the tech sector, ranging from anti-competitive practices to intellectual property rights. Other key risks include labour relations, data privacy, product governance and resource use.
According to Sustainalytics, the company's overall management of material ESG issues is average.
The company’s executive pay isn’t tied to ESG targets, and its board committee oversees only governance. It also lacks an environmental policy and recent ESG reports, but it does have a whistleblower program in place. Palantir’s three co-founders have control over the company through a complex share structure; this reduces the impact that ordinary shareholders can have and is a risk to note.
The author holds shares in Palantir.
Palantir key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember that yields are variable and not a reliable indicator of future income. Keep in mind that key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.