Summary
Palantir's fiscal 2023 second quarter showed steady top-line growth and a swing to GAAP profitability. Revenue rose 13% year over year to $533.3 million. Gross profit was $426.4 million, up 15.0%, and gross margin reached 80.0%, up 1.6 percentage points. GAAP income from operations was $10.1 million, an operating margin of 1.9%, up 10.7 percentage points and a swing from a loss in the prior-year quarter. GAAP net income was $28.1 million, or $0.01 per diluted share, compared with a loss a year earlier. The company described this as its third consecutive quarter of GAAP profitability and its second consecutive quarter of GAAP operating profitability. Adjusted income from operations was $135.0 million, a 25% margin, and adjusted EBITDA was $143.4 million, a 27% margin. Adjusted net income attributable to common stockholders was $119.5 million.
Customer metrics expanded. Palantir ended the quarter with 421 customers, up 38% year over year and 8% quarter over quarter. U.S. commercial customer count increased 35%, from 119 in Q2 2022 to 161 in Q2 2023. Adjusted EPS was $0.05. Adjusted free cash flow was $96.0 million, an 18% margin. In the first half of 2023, revenue was $1.06 billion, up 15.1%, GAAP net income was $44.9 million, and cash from operations was $278 million. First-half adjusted income from operations was $260.1 million, a 25% margin, and first-half adjusted free cash flow was $284.9 million, a 27% margin. First-half adjusted EBITDA was $276.9 million, a 26% margin. Contribution margin was 54% for the quarter and 54% for the first half. Gross margin excluding stock-based compensation was 81% for the quarter and 81% for the first half.
Management guided for continued growth. For Q3 2023, Palantir expects revenue of between $553 million and $557 million and adjusted income from operations of $135 million to $139 million. The company also said it expects GAAP net income for the quarter. For full year 2023, it raised revenue guidance to in excess of $2.212 billion and raised adjusted income from operations guidance to in excess of $576 million. It continues to expect GAAP net income in each quarter. The board authorized a stock repurchase program of up to $1.0 billion of Class A common stock. The timing and amount of repurchases depend on factors including achieving an additional quarter of profitability. The program has no mandated end date and no minimum purchase commitment.
Cash generation improved, but some forward-looking metrics softened. Operating cash flow was $90.2 million for the quarter, up 44.5% year over year, while capital expenditures were $3.9 million, down 27.9%. Deferred revenue was $497.8 million, up 15.8%. Remaining performance obligations fell 19.4% to $967.6 million. The company pointed to macroeconomic risks, including rising inflation and interest rates, monetary policy changes, financial services sector instability, and foreign currency fluctuations. Management said early- and growth-stage customers may be unable to generate sufficient revenue or profitability or to access financing, which has impacted and may continue to impact expected revenue and collections. Government customers face budget and spending uncertainties, changes in timing and spending priorities, and regulatory and policy changes. The Russia-Ukraine conflict remains a watch item, though the company does not expect a material impact on its business and results of operations. It has no office locations in Russia and none of its revenues came from sales to entities headquartered in Russia. In 2023, Palantir announced partnerships with Ukraine to support defense and reconstruction efforts and investigations of potential war crimes, among other activities, and its current operations related to Ukraine are not material to its financial position or results of operations. Foreign currency exchange rates, especially the U.S. dollar relative to the Euro and British pound sterling, could unfavorably impact revenues from certain non-U.S. customers, though the impact for the six months ended June 30, 2023 was not material. COVID-19 continues to impact the global economy, and the extent of future impact remains uncertain, though to date it has not had a material adverse impact on results of operations.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $533.3M | $525.2M | +1.5% | $473.0M | +12.7% |
| Gross profit | $426.4M | $417.5M | +2.1% | $370.8M | +15.0% |
| Gross margin | 80.0% | 79.5% | +0.5 pp | 78.4% | +1.6 pp |
| Research & development | $99.5M | $90.1M | +10.5% | $88.2M | +12.9% |
| Sales & marketing | $184.2M | $187.1M | -1.6% | $168.9M | +9.1% |
| General & administrative | $132.6M | $136.2M | -2.6% | $155.5M | -14.7% |
| Total operating expenses | $416.3M | $413.4M | +0.7% | $412.5M | +0.9% |
| Operating income (loss) | $10.1M | $4.1M | +144.8% | -$41.7M | +124.1% |
| Operating margin | 1.9% | 0.8% | +1.1 pp | -8.8% | +10.7 pp |
| Net income (loss) | $28.1M | $16.8M | +67.4% | -$179.3M | +115.7% |
| Net margin | 5.3% | 3.2% | +2.1 pp | -37.9% | +43.2 pp |
| Diluted EPS | $0.01 | $0.01 | ±$0.00 | -$0.09 | +$0.10 |
| Customers | 421 | 391 | +7.7% | 304 | +38.5% |
Risks
Top three customers together accounted for 20% of revenue for the six months ended June 30, 2023 and 16% for the six months ended June 30, 2022. Certain large customers have reduced spend or terminated agreements, and some customer contracts permit termination for convenience with three to six months notice.
Government customers represented 56% of revenue for the six months ended June 30, 2023. Large government customers face budget and spending uncertainties, continuing resolutions, and delays in contract awards, and many contracts contain termination for convenience provisions.
Sales efforts are time- and expense-intensive, with pilot deployments often at no or low cost and a sales cycle that often lasts six to nine months but can extend to a year or more. There is no guarantee that pilots will convert to full revenue-generating contracts.
The company is developing and releasing its Artificial Intelligence Platform (AIP), but risk factors state that new platforms such as AIP may not gain market acceptance, competitors may introduce AI-based products, and customers may be reluctant to purchase products incorporating generative AI.
MD&A states current macroeconomic conditions have impacted, and may continue to adversely impact, customers particularly early- and growth-stage customers, and may limit the company's ability to realize the full value of commercial contracts. Risk factors cite inflation, interest rates, financial services sector instability, and reduced technology spending.
Remaining performance obligations were $967.6 million for FY2023 Q2, down 19.4% from $1.20 billion for FY2022 Q2. This decline could reduce future revenue visibility given long and unpredictable sales cycles.
The risk factors disclose that the company and certain officers and directors were recently sued in purported class action lawsuits and derivative lawsuits. These matters could result in substantial costs and divert management attention and resources.
The multi-class structure, Founder Voting Trust Agreement, and Founder Voting Agreement concentrate voting power with the Founders and their affiliates. The Ownership Threshold is 100,000,000 Corporation Equity Securities, a small minority of the 2,149,980,495 shares of common stock outstanding as of June 30, 2023.
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)
Customer count growth (QoQ)
Cash from operations
Gross Margin (excluding stock-based compensation)
Cash from Operations Margin
Summary, forecast, risks and KPIs are extracted from Palantir Technologies Inc.'s SEC filings for Q2 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.