10-Q: Palantir Q3 2025 Revenue Soars 63%, Profitability Continues

Palantir Technologies Inc. reported robust third-quarter 2025 results, with revenue growing 63% year-over-year and strong profitability driven by both government and commercial segments.

Summary

• Revenue for the three months ended September 30, 2025, reached $1,181.092 million, marking a 63% increase from $725.516 million in the same period of 2024.
• Revenue for the nine months ended September 30, 2025, was $3,068.644 million, a 51% increase from $2,037.988 million in the prior year's nine-month period.
• Net income for Q3 2025 was $476.748 million, a significant rise from $149.341 million in Q3 2024.
• Net income for the nine months ended September 30, 2025, was $1,023.037 million, up from $390.982 million in the corresponding period of 2024.
• Diluted earnings per share (EPS) for Q3 2025 was $0.18, compared to $0.06 in Q3 2024.
• Diluted EPS for the nine months ended September 30, 2025, was $0.40, up from $0.16 in the same period of 2024.
• Gross profit for Q3 2025 was $973.785 million, achieving an 82% gross margin, an increase from 80% in Q3 2024.
• Income from operations for Q3 2025 was $393.256 million, a substantial increase from $113.140 million in Q3 2024.
• Adjusted income from operations for Q3 2025 was $600.540 million, representing a 51% adjusted operating margin, up from 38% in Q3 2024.
• The total customer count grew to 911 as of September 30, 2025, from 629 as of September 30, 2024.
• Average revenue from the top twenty customers for the trailing twelve months ended September 30, 2025, increased by 38% to $83.0 million.
• Remaining performance obligations stood at $2.6 billion as of September 30, 2025, with approximately 44% expected to be recognized as revenue over the next 12 months.
• The company held $6.4 billion in cash, cash equivalents, and short-term U.S. Treasury securities as of September 30, 2025.
• Approximately $880.0 million remained available for future repurchases under the $1.0 billion stock repurchase program as of September 30, 2025.

Sentiment

Score: 8

Explanation: The filing reports strong financial performance with significant revenue and net income growth, improved margins, and an expanding customer base. The company maintains a robust liquidity position. While acknowledging various industry and operational risks, the overall tone and results indicate a very positive outlook and execution.

Positives

• Achieved robust revenue growth of 63% year-over-year for Q3 2025 and 51% for the nine months ended September 30, 2025, demonstrating strong market demand.
• Reported a significant increase in net income to $476.7 million in Q3 2025, more than tripling from $149.3 million in Q3 2024.
• Improved gross margin to 82% in Q3 2025 (84% excluding stock-based compensation), indicating enhanced operational efficiency.
• Income from operations saw substantial growth, reaching $393.3 million in Q3 2025, up from $113.1 million in Q3 2024.
• Adjusted operating margin increased to 51% in Q3 2025 from 38% in Q3 2024, reflecting strong underlying profitability.
• Expanded customer base by 45% year-over-year, growing from 629 to 911 customers as of September 30, 2025.
• Average revenue from the top twenty customers grew by 38%, highlighting successful expansion within existing client relationships.
• Maintained a strong liquidity position with $6.4 billion in cash, cash equivalents, and short-term U.S. Treasury securities.
• Generated positive cash flow from operations of $1.4 billion for the nine months ended September 30, 2025.
• Successfully dismissed the Cupat securities class action lawsuit with prejudice on April 4, 2025, and the Central Laborers Pension Fund derivative action in its entirety on April 25, 2025, reducing legal uncertainties.

Negatives

• Cash and cash equivalents decreased to $1,615,967 thousand as of September 30, 2025, from $2,098,524 thousand as of December 31, 2024.
• Net cash used in investing activities increased to $1,825,720 thousand for the nine months ended September 30, 2025, from $980,849 thousand in the same period in 2024, primarily due to increased purchases of marketable securities.
• Net cash used in financing activities was $16,012 thousand for the nine months ended September 30, 2025, a shift from net cash provided of $224,700 thousand in the same period in 2024, driven by taxes paid related to net share settlement of equity awards and stock repurchases.
• Revenue recognized from Strategic Commercial Contracts decreased by $6.7 million for the three months ended September 30, 2025, and by $29.5 million for the nine months ended September 30, 2025, compared to the same periods in 2024.
• Some early-stage Investee customers associated with Strategic Commercial Contracts filed for bankruptcy or terminated their agreements, negatively impacting expected revenue realization.

Risks

• Inability to maintain profitability in the future due to anticipated increases in operating expenses as the business expands.
• Failure to sustain revenue growth rates due to macroeconomic factors, increased competition, slowing demand, or contract terminations.
• Long and unpredictable sales cycles, particularly for large government and commercial customers, requiring significant upfront investment without guaranteed sales.
• Dependence on a limited number of customers for a substantial portion of revenue, posing risks if these relationships are impaired or contracts are not renewed.
• Significant fluctuations in quarterly results of operations and key business measures, making future performance difficult to predict.
• Seasonality of sales, with historically lower sales in the first quarter and increases in the third and fourth quarters, impacting revenue recognition and cash flows.
• Complexity of platforms and potentially lengthy implementation processes, which could lead to customer dissatisfaction or reputational harm.
• Failure to successfully develop and deploy new technologies, including AI, to meet evolving customer needs, or the introduction of superior competing products.
• Reliance on the compatibility of platforms with third-party products and services, with risks of incompatibility or lack of support.
• Challenges in effectively managing future growth, including integrating, developing, retaining, and motivating a growing global employee base.
• Inability to hire, retain, train, and motivate qualified personnel and senior management, including the Chief Executive Officer, Alexander Karp.
• Failure to successfully build, expand, and deploy the marketing and sales organization in a timely manner.
• Inability to maintain and enhance brand and reputation, potentially harmed by unfavorable media coverage or misuse of platforms by customers.
• Risks associated with exclusivity arrangements or unique contractual terms, including those involving noncash consideration, which may limit growth or present liabilities.
• Intense competition in markets from large enterprise software companies, government contractors, system integrators, and emerging companies.
• Potential negative impact if customers are unwilling to adopt a product-based business model over a traditional labor-based model.
• Risks associated with joint ventures, channel sales relationships, platform partnerships, and strategic alliances, including lack of success, diversion of management attention, and conflicting interests.
• Challenges and increased regulatory scrutiny associated with expanding into new commercial markets and customer verticals.
• Inability to secure necessary financing for operations, growth, or acquisitions, potentially leading to dilution or debt restrictions.
• Risks associated with strategic investments, including partial or complete loss of invested capital and failure to realize expected benefits.
• Issues arising from the use of AI (including machine learning, large language, and other generative/agentic AI models) in platforms and business, potentially leading to reputational harm, legal liability, or increased cybersecurity risks.
• Dependence on computing infrastructure operated by third parties (e.g., AWS, Microsoft Azure), with risks of errors, disruptions, or failures adversely affecting business operations.
• Failure to adequately obtain, maintain, protect, and enforce intellectual property and other proprietary rights.
• Exposure to intellectual property rights claims from third parties, which can be costly to defend and limit technology use.
• Real or perceived errors, failures, defects, or bugs in platforms could adversely affect results of operations and growth prospects.
• Reliance on the availability of licenses to third-party technology that may be difficult to replace or cause delays if licenses are not renewed or obtained on favorable terms.
• Platforms contain open source software, and failure to comply with license terms could negatively affect the business.
• Subject to complex and evolving U.S. and non-U.S. laws and regulations regarding privacy, data protection, and security, including GDPR, DORA, and new state-level AI legislation, which can lead to compliance costs and liabilities.
• Non-U.S. sales and operations are subject to additional risks, including geopolitical tensions, foreign currency fluctuations, and compliance with diverse regulatory requirements.
• Failure to comply with anti-bribery and anti-corruption laws (e.g., FCPA, U.K. Bribery Act) could lead to penalties and adverse consequences.
• Governmental trade controls, including export and import controls, sanctions, and customs requirements, could subject the company to liability or limit market access.
• Changes in accounting principles or their application could result in unfavorable accounting charges or effects.
• Judgments or estimates relating to critical accounting policies proving incorrect could cause results of operations to fall below expectations.
• Potential for additional tax liabilities due to changes in U.S. or foreign tax laws, or disagreements with tax authorities.
• Inability to fully utilize a significant portion of net operating loss carryforwards and tax credits.
• Risk of being required to collect sales or other related taxes for license arrangements in jurisdictions where this has not historically been done.
• Significant portion of business depends on sales to the public sector; failure to receive and maintain government contracts or changes in policies could adversely affect results.
• Contracts with governments involve classified programs, limiting investor insight into portions of the business.
• Risk that employees cannot obtain and maintain required personnel security clearances or that the company cannot establish and maintain required facility security clearances.
• Many customer contracts, especially government contracts, may be terminated for convenience, potentially impacting anticipated revenue.
• Inability to realize the full deal value of customer contracts due to various contingencies.
• Decline in U.S. and other government budgets, changes in spending priorities, or delays in contract awards could significantly and adversely affect future revenue.
• The public trading price of Class A common stock may be volatile and decline regardless of operating performance.
• The multi-class structure of common stock concentrates voting power with Founders and their affiliates, effectively limiting the ability of other stockholders to influence important transactions.
• No guarantee that the Share Repurchase Program will result in increased shareholder value.
• Provisions in the amended and restated certificate of incorporation and bylaws may discourage certain types of transactions, potentially depressing the trading price of Class A common stock.
• If securities or industry analysts publish inaccurate or unfavorable research, the trading price and volume of Class A common stock could decline.
• The company may become a controlled company under Nasdaq rules, potentially reducing protections for other stockholders.
• No expectation to pay dividends in the foreseeable future, requiring stockholders to rely on stock price appreciation for gains.
• Adverse economic conditions or reduced technology spending may adversely impact the business.
• Exposure to foreign currency exchange rate fluctuations, particularly in Euro, JPY, and GBP.
• Natural disasters, including climate change, and other catastrophic events beyond control could harm the business.
• Failure to maintain an effective system of internal controls could impair the ability to produce timely and accurate financial statements.
• Significant costs and demands upon management result from complying with laws and regulations affecting public companies.

Future Outlook

The company anticipates continued increases in operating expenses as it expands its business, industry verticals, and operations, upgrades infrastructure, hires additional employees, expands into new markets, and invests in R&D and sales and marketing. It expects U.S. customers to remain a significant source of revenue growth. The company is evaluating the full effects of the One Big Beautiful Bill Act but does not expect a material impact on its estimated annual effective tax rate or consolidated financial statements in the current fiscal year. The company believes it has sufficient liquidity to meet operating requirements for at least the next twelve months and the foreseeable future.

Management Comments

• "We believe AIP uniquely allows users to connect LLMs and other AI with their data and operations to facilitate decision-making within the legal, ethical, and security constraints that they require."
• "While our focus in the short term remains on making our software platforms available to increasingly broad swaths of the market, we are also working to identify additional component parts and products embedded within those platforms that have potential as commercial offerings on their own."
• "We believe that every institution faces challenges that our platforms and products were designed to address."
• "Our approach with all our clients is to establish a partnership that transforms the way they use data in pursuit of their goals."
• "We expect that U.S. customers will continue to be a source of significant revenue growth for us."
• "We continue to believe that our government customers remain a meaningful source of revenue for our business, particularly during periods of economic uncertainty."
• "We do not expect that the resulting challenging macroeconomic conditions will have a material impact on our business or results of operations." (Regarding Russia-Ukraine, Israel/Middle East conflicts)
• "We do not believe that inflation has had a material effect on our business, results of operations, or financial condition."

Industry Context

The company operates in a rapidly evolving and highly competitive technology market, particularly in data integration, advanced data analysis, and artificial intelligence (AI). Its focus on deploying AI platforms (AIP) leveraging large language models (LLMs) aligns with a significant industry trend towards operationalizing AI for enterprise data. The company's dual market penetration strategy, with strong growth in both government and commercial sectors, positions it to capitalize on diverse market needs. The company acknowledges the increasing investment in AI by peers and competitors and the associated risks and challenges, including ethical issues and evolving regulatory landscapes (e.g., EU AI Act, state-level AI governance legislation).

Legal Proceedings

• The putative securities class action complaint Cupat v. Palantir Technologies Inc., et al. was dismissed with prejudice on April 4, 2025, with judgment entered for the defendants. Plaintiffs filed a Notice of Appeal on May 2, 2025.
• Stockholder derivative actions Li v. Karp, et al. (filed Nov 21, 2022) and Miao v. Karp, et al. (filed Jan 27, 2023) are ongoing, asserting breach of fiduciary duty and related claims.
• The stockholder derivative action Central Laborers Pension Fund v. Karp, et al. was dismissed in its entirety under Rule 23.1 on April 25, 2025.
• As of September 30, 2025, the company was not aware of any currently pending legal matters or claims, individually or in the aggregate, expected to have a material adverse impact on its condensed consolidated financial statements.

Related Party Transactions

• Alexander Karp, the company's Chief Executive Officer, uses a non-commercial aircraft beneficially owned by him (the Executive Aircraft) for business and personal travel.
• During the nine months ended September 30, 2025, the company incurred expenses of $13.8 million related to the use of the Executive Aircraft. Expenses were not material during the nine months ended September 30, 2024.

Stakeholder Impact

• Shareholders: Positive impact from strong revenue and net income growth, increased EPS, and an ongoing share repurchase program. Potential dilution from future equity financing. Voting power remains concentrated with Founders due to the multi-class stock structure.
• Employees: Continued investment in personnel, but also risks related to hiring, retaining, and motivating qualified staff in a competitive market. Stock-based compensation is a significant component of overall expenses.
• Customers: Increased adoption of platforms, particularly in government and commercial sectors. Risks related to complex implementations, potential software errors, and reliance on third-party infrastructure. Decreased revenue from Strategic Commercial Contracts due to some Investee customers facing bankruptcy or contract termination.
• Suppliers/Vendors: Continued reliance on third-party cloud hosting services (AWS, Microsoft Azure) and other technology providers. Commitments for cloud hosting services, including $170.2 million for the contract year beginning October 1, 2025.
• Creditors: Strong liquidity position with $6.4 billion in cash and marketable securities and no outstanding debt under the $500.0 million credit facility, indicating low credit risk.

Next Steps

• Continue to expand business, industry verticals, and the breadth of operations.
• Upgrade infrastructure and enhance systems, processes, and controls.
• Hire additional employees, particularly in accounting and financial staff, and sales personnel.
• Expand into new markets and lease more real estate to accommodate anticipated future growth.
• Invest in research and development to continue developing and refining offerings, including new platforms, features, and modules like AIP.
• Invest in sales and marketing, including expanding the sales organization and enhancing brand awareness.
• Identify additional component parts and products embedded within platforms that have potential as commercial offerings on their own.
• Evaluate partnerships and investment opportunities in complementary businesses, employee teams, technologies, and intellectual property rights.
• Continue to monitor the direct and indirect impacts of macroeconomic conditions and geopolitical tensions on the business.
• Evaluate the impacts of new accounting standards (ASU 2024-03, ASU 2025-06, ASU 2025-07) on consolidated financial statements.
• Monitor developments and evaluate impacts of Pillar Two tax provisions on financial condition or results of operations.
• Continue to monitor and upgrade internal controls over financial reporting.
• May seek additional equity or debt financing on an as-needed or opportunistic basis.
• May repurchase shares of Class A common stock under the Share Repurchase Program, with approximately $880.0 million remaining available.

Key Dates

Recommendation

The company demonstrated exceptional financial performance in Q3 2025, with revenue soaring 63% year-over-year and net income more than tripling. Gross and adjusted operating margins improved significantly, indicating enhanced operational efficiency. The customer base expanded considerably, and average revenue from top customers showed robust growth, reflecting strong product adoption and retention. The company's strategic focus on AI and its dual market penetration in government and commercial sectors position it well for continued expansion. While macroeconomic and competitive risks exist, the current results and strong liquidity suggest a compelling investment opportunity. The dismissal of key legal proceedings also reduces uncertainty.

Keywords

AI, Artificial Intelligence, Data Analytics, Software Platforms, Government Contracts, Commercial Software, Foundry, Gotham, Apollo, AIP, SEC Filing, 10-Q, Financial Results, Revenue Growth, Profitability, Stock Repurchase, Cybersecurity, Data Privacy, Corporate Governance