Summary
Palantir's first quarter of 2023 marked a turn toward profitability. Revenue rose 17.7% from the prior-year quarter to $525.2 million. Gross profit rose 18.6% to $417.5 million, and gross margin rose 0.7 percentage points to 79.5%. Operating income swung to positive $4.1 million, which the company described as its first quarter of positive GAAP operating income. Operating margin rose 9.6 percentage points to 0.8%. Net income attributable to common stockholders swung to $16.8 million, a second consecutive quarter of positive GAAP net income, and diluted EPS was $0.01.
Cash generation stood out. Operating cash flow rose 428.2% to $187.4 million. Capital expenditures fell 68.7% to $4.8 million. Adjusted free cash flow was $188.9 million, a 36% margin. Adjusted income from operations was $125.1 million, a 24% margin, and adjusted EBITDA was $133.4 million, a 25% margin. Adjusted EPS was $0.05. Those adjusted measures exclude stock-based compensation and related employer payroll taxes, which is why they sit far above the GAAP results. The distance between GAAP operating income of $4.1 million and adjusted income from operations of $125.1 million shows how much of the profit depends on excluding those items.
Operational metrics pointed to a broader customer base. Customer count reached 391, up 41% from a year earlier and up 7% quarter over quarter. US commercial customer count rose 50% year over year, from 103 customers to 155 customers. Management described the depth of engagement with and demand for the Artificial Intelligence Platform (AIP) as without precedent. Government customers produced 55% of revenue in the quarter and commercial customers produced 45%. US customers accounted for 64% of revenue, with the remaining 36% from outside the United States.
The balance sheet carried some caution. Deferred revenue fell 15.6% from the prior-year quarter to $427.9 million. Remaining performance obligations fell 22.0% to $936.0 million. Those declines contrast with the revenue growth and are worth monitoring. The company also reported no outstanding debt balances and undrawn credit commitments, which gives it room to keep funding pilots and platform work.
Guidance framed the rest of the year. Palantir guided to adjusted income from operations of between $118 million and $122 million for the second quarter of 2023, alongside GAAP net income. For the full year 2023, the company guided to adjusted income from operations of between $506 million and $556 million and GAAP net income in each quarter. Revenue guidance was issued for both the second quarter and the full year. Management wrote that it anticipates remaining profitable each quarter through the end of the year. The company said a reconciliation of non-GAAP guidance measures to GAAP measures is not available on a forward-looking basis without unreasonable effort because of uncertainty around items such as stock-based compensation and related employer payroll taxes.
Risks remain visible. Macroeconomic conditions, rising inflation and interest rates, monetary policy changes, financial services sector instability, and foreign currency fluctuations could affect results. The MD&A also cites the ongoing Russia-Ukraine conflict. Large government customers face budget and spending uncertainty, and many contracts carry termination for convenience provisions, which limits how much of the booked value converts to revenue. Early- and growth-stage customers may struggle to generate revenue or access financing, which could weigh on collections. Palantir expects cost of revenue, sales and marketing, research and development, and general and administrative expenses to increase in absolute dollars.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $525.2M | $508.6M | +3.3% | $446.4M | +17.7% |
| Gross profit | $417.5M | $404.3M | +3.3% | $352.0M | +18.6% |
| Gross margin | 79.5% | 79.5% | +0.0 pp | 78.8% | +0.7 pp |
| Research & development | $90.1M | $82.0M | +9.8% | $88.6M | +1.7% |
| Sales & marketing | $187.1M | $190.2M | -1.7% | $160.5M | +16.6% |
| General & administrative | $136.2M | $149.9M | -9.1% | $142.3M | -4.3% |
| Total operating expenses | $413.4M | $422.1M | -2.1% | $391.4M | +5.6% |
| Operating income (loss) | $4.1M | -$17.8M | +123.1% | -$39.4M | +110.4% |
| Operating margin | 0.8% | -3.5% | +4.3 pp | -8.8% | +9.6 pp |
| Net income (loss) | $16.8M | $30.9M | -45.6% | -$101.4M | +116.6% |
| Net margin | 3.2% | 6.1% | -2.9 pp | -22.7% | +25.9 pp |
| Diluted EPS | $0.01 | -$0.18 | +$0.19 | -$0.05 | +$0.06 |
| Customers | 391 | — | — | 277 | +41.2% |
Risks
Rising inflation and interest rates, financial services sector instability, and the Russia-Ukraine conflict have disrupted customers and may reduce technology spending or lengthen sales cycles. MD&A also notes these conditions could impair early- and growth-stage customers' ability to pay.
55% of Q1 2023 revenue came from government customers. U.S. government budgets, continuing resolutions, and the one-year limit on exercising contract options may delay or reduce revenue, and many contracts are terminable for convenience.
Top three customers accounted for 20% of revenue for the three months ended March 31, 2023, up from 17% in the prior-year quarter. Loss or termination of one of these relationships could materially reduce revenue.
Sales cycle often lasts six to nine months and can extend a year or more, and the company invests in no-cost or low-cost pilots with no guarantee of conversion to paid contracts. MD&A notes pilots are generally at the company's own expense.
The company is developing and releasing its Artificial Intelligence Platform (AIP) with large language models, but competitors may incorporate AI into competing products. Failure to develop or gain market acceptance for AIP could harm growth.
Intense competition from large enterprise software companies, government contractors, and system integrators that have greater resources and may bundle products or sell at zero or negative margins to discourage adoption of Palantir.
Highly dependent on CEO Alexander Karp and other key personnel, who are at-will employees. Difficulty hiring and retaining qualified personnel, especially engineers, could delay product development and harm sales.
As of December 31, 2022, total remaining deal value was $3.7 billion, with $2.0 billion from commercial and $1.7 billion from government contracts. Many contracts are terminable for convenience and the company historically has not realized all revenue from full deal value.
Multi-class structure and Founder Voting Agreement concentrate voting power with Founders Stephen Cohen, Alexander Karp, and Peter Thiel. The Founders can retain effective control even after substantial liquidity events, and their voting power may exceed their economic interests.
Historically, first-quarter sales are relatively lower, with increases in subsequent quarters and substantial increases in Q3 and Q4, partly due to the U.S. government September 30 fiscal year end. This seasonality may cause fluctuations in results and cash flows.
Joint ventures and partnerships with IBM, SOMPO, HD Hyundai, and Airbus limit the company's ability to independently sell platforms in certain markets and may expose it to partner non-performance or conflicts of interest.
Unfavorable news or social media coverage, including about sensitive government or commercial customer relationships, could damage the brand. Activist protests at company properties have occurred, and confidentiality obligations limit the company's ability to respond.
MD&A states current macroeconomic conditions may impair early- and growth-stage customers' ability to pay, which could reduce collections and realization of full commercial contract value.
The company and certain officers and directors were recently sued in purported class action and derivative lawsuits, which could result in substantial costs and divert management attention.
SaaS KPIs
All quarters →Adjusted Operating Margin
Adjusted Free Cash Flow Margin
Adjusted free cash flow
Adjusted income from operations
Adjusted EBITDA Margin
Adjusted EBITDA
Contribution Margin
US Commercial Customer Count
Customer count growth (YoY)
Gross margin, excluding stock-based compensation
Customer count growth (QoQ)
Cash from operations
Adjusted EPS, diluted
Cash from Operations Margin
Adjusted net income attributable to common stockholders
US Commercial Customer Count Growth (YoY)
Summary, forecast, risks and KPIs are extracted from Palantir Technologies Inc.'s SEC filings for Q1 FY2023 (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.