Palantir Technologies Inc. Q3 FY2024 earnings call

• Revenue growth was exceptionally strong with 30% year-over-year growth in Q3. U.S. business drove growth, with U.S. government business up 40% year-over-year and 15% sequentially, and U.S. commercial business up 54% year-over-year and 13% sequentially.
• Focus on deploying AI models in production, with examples like automating underwriting workflows at a leading global insurance organization, increasing on-time in full delivery rates at Associated Materials, and impactful workflows at Trinity Rail.
• In U.S. government, outfitting warfighters with advantages, such as through Maven Smart System and progress with Army Titan and AIDP. Also announced Warp Speed, a modern American manufacturing operating system.
• Commercial business saw U.S. Commercial customer count grow 77% year-over-year, with notable deal cycles like a large American equipment rental company expanding work and several companies signing seven-figure ACV deals after boot camps.

Revenue grew 30% year-over-year in Q3 to $726 million. U.S. business achieved 44% year-over-year and 14% sequential revenue growth. U.S. government business revenue growth accelerated to 40% year-over-year and 15% sequentially, while U.S. commercial business had 54% year-over-year and 13% sequential revenue growth. Commercial segment: Third quarter Commercial revenue grew 27% year-over-year and 3% sequentially to $317 million. Excluding strategic commercial contracts, Commercial revenue grew 30% year-over-year and 3% sequentially. U.S. Commercial revenue grew 54% year-over-year and 13% sequentially to $179 million. International commercial revenue was $138 million, up 3% year-over-year but down 7% sequentially. Government segment: Third quarter Government revenue grew 33% year-over-year and 10% sequentially to $408 million. U.S. government revenue grew 40% year-over-year and 15% sequentially to $320 million. International government revenue was $89 million, up 13% year-over-year but down 5% sequentially.

• Raised full year 2024 revenue guidance to between $2.805 billion and $2.809 billion.
• Raised adjusted income from operations guidance to between $1.054 billion and $1.058 billion.
• Raised adjusted free cash flow guidance to an excess of $1 billion.
• Q4 2024 expected revenue between $767 million and $771 million, and adjusted income from operations between $298 million and $302 million.

• Market competition, as AI models are becoming more commoditized and converging, which may impact market share.
• Macro-economic challenges that could affect customer investment willingness.
• International market headwinds, such as continued headwinds in Europe and revenue step-down in the Middle East from a government sponsored enterprise.

Q: How will Palantir differentiate its AI offerings from others, including the model creators?

A: Palantir has a decade-long head start in building AI applications at scale throughout the enterprise. It starts with ontology and using it to drive AIP across applications. The models are converging, but Palantir's ability to extract value from large language models within the enterprise context is its differentiation.

Q: As Palantir continues to invest in new AI technologies and expand globally, how are you balancing these investments with maintaining or improving profitability and operating margins?

A: Revenue is growing strongly, with adjusted operating margin at 38% in Q3, an eighth consecutive quarter of expanding margins. They are raising guidance for adjusted free cash flow and operating income while continuing to invest in technical talent and product pipeline.

Q: Has it even surprised you just how quickly from a customer coming into a boot camp, potential customer to conversion to megadeals?

A: David Glazer mentioned seeing multiple customers across different industries go from boot camp to seven-figure ACV deals in less than two months. Alex Karp noted the rapid expansion in the U.S. with customers moving quickly and sharing information, leading to quick conversions.

Q: What change for U.S. government partners to actually want a partner?

A: Ryan Taylor said there are two dimensions, including Mission Manager as a radical accelerant for partners to get to revenue, service existing revenue more profitably, and expand market access. David Glazer added that Palantir opened up products to allow partners to safely work with government data, shifting the perception and enabling better market entry.

Q: Give an update on the strategic commercial contracts and how are you thinking about the remaining deal value?

A: David Glazer said strategic commercial contracts are a tiny part of the business, de minimis in Q3, and the program ended three years ago. The remaining deal value is not highly relevant as it's a small portion of the overall business.