Summary
Palantir Technologies reported first quarter 2021 revenue of $341.2 million, up 49% from the prior-year quarter. Gross profit rose 61.9% to $267.1 million, and gross margin reached 78.3%, up 6.3 percentage points. The top line still arrived with a heavy GAAP loss. Loss from operations widened to $114.0 million, and operating margin was -33.4%, down 2.8 percentage points. Net loss widened to $123.5 million. Diluted EPS was -$0.07, a narrower loss per share than the prior-year quarter. US commercial revenue grew 72% year over year, and US government revenue grew 83%.
Cash generation was the standout. Operating cash flow was $116.9 million, up $404.1 million from the prior-year quarter, which management said represented a 34% margin. Capital expenditures were $0.7 million, down 76.5%. Adjusted free cash flow was $151.0 million, up $441 million year over year, a 44% margin. On a non-GAAP basis, adjusted income from operations was $116.6 million and adjusted EBITDA was $119.8 million. Adjusted net income was $82.7 million, and adjusted EPS was $0.04. The gap between the GAAP loss and the adjusted profit is mostly stock-based compensation, which totaled $193.7 million.
The customer base kept expanding. Palantir ended the quarter with 149 customers, up from 131 a year earlier. Contribution margin was 60%, up from 41%. Commercial customers accounted for 39% of revenue and government agencies 61%. The United States generated 58% of revenue, with the rest from abroad. Within the customer phases, Scale accounts ran a 66% contribution margin and Expand accounts ran 4%, while Acquire accounts were still worked at a loss. Management links the margin improvement to existing account expansion, better sales efficiency, and more centralized hosting.
Guidance puts the emphasis on the next quarter and the full year. For the second quarter of 2021, management guided to $360 million in revenue, representing 43% year-over-year growth, and an adjusted operating margin of 23%. For the full year 2021, the company expects adjusted free cash flow in excess of $150 million. Longer term, management keeps its expectation of annual revenue growth of 30% or greater for 2021 through 2025. Those targets are non-GAAP, and the company does not reconcile them to GAAP on a forward-looking basis without unreasonable effort. The 34% adjusted operating margin booked in the first quarter sits well above the second quarter guide.
Risks look familiar for a company at this stage. Palantir cites a long and unpredictable sales cycle, the need to keep growing its direct salesforce, and the challenge of making channel partnerships work. Platform implementations can be complex and lengthy, and results can swing by quarter because of seasonality. The COVID-19 pandemic has kept offices closed and travel spending low, and management expects some travel and office costs to return, though not to pre-pandemic levels. Other named risks include demand for the platforms, retaining and expanding the customer base, realizing the full value of customer contracts, and the sufficiency of cash for liquidity needs. The company also flags coverage it views as inaccurate or misleading, and any breach of customer or third-party data. Deferred revenue stood at $552.4 million and remaining performance obligations at $625.9 million as of March 31, 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $341.2M | $322.1M | +5.9% | — | — |
| Gross profit | $267.1M | $251.6M | +6.2% | — | — |
| Gross margin | 78.3% | 78.1% | +0.2 pp | — | — |
| Research & development | $98.5M | $94.1M | +4.6% | — | — |
| Sales & marketing | $136.1M | $147.6M | -7.8% | — | — |
| General & administrative | $146.6M | $166.4M | -11.9% | — | — |
| Total operating expenses | $381.1M | $408.2M | -6.6% | — | — |
| Operating income (loss) | -$114.0M | -$156.6M | +27.2% | — | — |
| Operating margin | -33.4% | -48.6% | +15.2 pp | — | — |
| Net income (loss) | -$123.5M | -$148.3M | +16.8% | — | — |
| Net margin | -36.2% | -46.1% | +9.9 pp | — | — |
| Diluted EPS | -$0.07 | -$0.15 | +$0.08 | — | — |
| Customers | 149 | 139 | +7.2% | — | — |
Risks
The multi-class structure, Founder Voting Trust Agreement, and Founder Voting Agreement concentrate voting power with the Founders. Founder Grants for 207.0 million Class B shares and an Ownership Threshold of 100,000,000 Corporation Equity Securities could let Founders retain effective control with limited economic interest, and the structure may make the Class A stock ineligible for certain indices.
The top three customers together accounted for 20% of revenue for the three months ended March 31, 2021 and 31% for the three months ended March 31, 2020. Customer contracts are often terminable for convenience, and reduced spend or termination by large customers could lower revenue.
Government agencies accounted for 61% of revenue in the three months ended March 31, 2021. Most contracts are subject to termination for convenience, the U.S. federal government cannot exercise contract options more than one year in advance, and budget delays or lapses in appropriations could delay revenue.
Sales efforts are time-intensive, the sales cycle often lasts six to nine months and can exceed a year, and pilots are often provided at no or low cost. The MD&A states Acquire phase customers generated $0.3 million of 2020 revenue with a $36.8 million contribution loss, and in Q1 2021 those same customers generated $3.6 million revenue with a $4.3 million contribution loss.
Stock-based compensation was $193.7 million in the three months ended March 31, 2021, helping drive GAAP loss from operations to $114.0 million, which widened from $70.2 million in Q1 2020, and net loss to $123.5 million, which widened from $54.3 million. MD&A highlights non-GAAP income from operations excluding stock-based compensation and related employer payroll taxes of $116.6 million, creating a wide GAAP to non-GAAP gap and quarterly expense variability.
The company is highly dependent on Alexander Karp, CEO and founder, and all executive officers are at-will employees. Hiring and retaining qualified personnel, especially engineering and sales personnel, is difficult and costly, and equity award value may affect retention.
As of December 31, 2020, total remaining deal value was $2.8 billion, but the majority of contracts are subject to termination for convenience and the company has historically not realized all revenue from full deal value. Revenue grew 48.8% in Q1 2021 versus Q1 2020, and the risk factor states growth rate may decline.
The first quarter historically has relatively lower sales, with increases in subsequent quarters and substantial increases in Q3 and Q4. This pattern is tied to U.S. government fiscal year end on September 30 and commercial customer budgeting around December 31 and can cause fluctuations in revenue and cash flows.
The company ceased to be an emerging growth company as of December 31, 2020 and will need an auditor attestation on internal control over financial reporting starting with the fiscal year ending December 31, 2021. Management has limited public company experience, limited accounting and financial reporting personnel, and recently reimplemented its ERP system.
The IBM channel sales relationship started in January 2021, the SOMPO joint venture in Japan limits independent selling and competing in Japanese markets, and the Airbus Skywise partnership limits independent platform sales to certain airlines. These arrangements may not succeed or may constrain growth.
Work with government and sensitive-industry customers has drawn public criticism, activist protests at properties, and unfavorable media coverage. Confidentiality obligations may limit the company's ability to respond, and damage to reputation could affect customers, employees, and investors.
Gotham and Foundry are complex and can require lengthy implementation and customer training. If training or ongoing services require more expenditures than estimated, or if customers do not use the platforms correctly, margins may be lower and customers may terminate or not renew.
The markets are very competitive, with larger enterprise software companies, government contractors, and system integrators that have greater resources, broader product lines, and greater ability to bundle or price aggressively. Increased competition could reduce demand, prices, and margins.
Adverse economic conditions, reduced technology spending, and the COVID-19 pandemic could hurt demand. MD&A states COVID-19 has not had a material adverse impact to date but the broader implications remain uncertain, and customers may defer discretionary purchases.
The risk factor summary notes that issues raised by the use of artificial intelligence in the platforms may result in reputational harm or liability. The filing does not quantify a current impact but identifies this as a risk.
SaaS KPIs
All quarters →Adjusted Operating Margin
Adjusted Free Cash Flow Margin
Adjusted free cash flow
Adjusted income from operations
Total Customers
Gross margin, excluding stock-based compensation
Summary, forecast, risks and KPIs are extracted from Palantir Technologies Inc.'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.