Summary
Palantir's third quarter of fiscal 2021 showed strong top-line momentum but still left GAAP losses on the table. Revenue rose 35.5% year over year to $392.1 million. For the nine months, revenue increased 43.9% to $1.1 billion. Gross profit was $305.3 million in the quarter, up 118.1%, and gross margin reached 77.9%, up 29.5 percentage points from the prior-year quarter. Nine-month gross profit was $857.2 million, up 75.5%. Those gains did not translate into GAAP operating or net income. The quarter's operating loss narrowed to $91.9 million, and the net loss narrowed to $102.1 million, or negative $0.05 per diluted share. For the nine months, the operating loss narrowed to $352.1 million and the net loss narrowed to $364.2 million, or negative $0.19 per diluted share. Non-GAAP adjusted income from operations was $116.1 million, with a 30% adjusted operating margin, largely because adjusted figures exclude stock-based compensation and related employer payroll taxes.
Cash generation improved. Operating cash flow was $100.8 million in the quarter and $240.4 million for the nine months. Adjusted free cash flow, a non-GAAP measure, was $119.1 million in the quarter at a 30% margin, and $319.9 million for the nine months at a 29% margin. Capital expenditures were $5.4 million in the quarter, up 251.5% year over year, while nine-month capital expenditures were $6.8 million, down 9.3%. The balance sheet showed deferred revenue of $510.3 million, down 18.0% from a year earlier, and remaining performance obligations of $873.9 million, up 171.7%. The deferred revenue decline is notable because it can reflect timing of billings and revenue recognition, though the company attributes the change in part to revenue recognized from amounts billed and collected in prior periods. RPO, by contrast, points to a larger contracted backlog.
Operationally, Palantir added 34 net new customers in the quarter. Commercial customer count grew 46% quarter over quarter, and US commercial revenue grew 103% year over year. The company closed 54 deals of $1 million or more, including 33 deals of $5 million or more and 18 deals of $10 million or more. Total remaining deal value grew 50% year over year to $3.6 billion. The customer base reached 203 organizations, up from 142 a year earlier. Average revenue for the top twenty customers over the trailing twelve months was $41.3 million, which grew 35% from $30.7 million. Contribution margin was 57% in the quarter and 58% for the nine months. Those metrics suggest the commercial push is gaining traction, but the company still depends heavily on large government relationships, and the sales cycle for major contracts remains long and unpredictable.
Guidance was constructive but not without caveats. For the fourth quarter of 2021, Palantir expects $418 million in revenue and a 22% adjusted operating margin. For the full year 2021, it expects revenue growth of 40% to $1.527 billion and has raised its adjusted free cash flow outlook to in excess of $400 million from in excess of $300 million. Management also reiterated a long-term goal of annual revenue growth of 30% or greater from 2021 through 2025. The main risks include the company's ability to execute its growth strategy, the sufficiency of cash to meet liquidity needs, demand for the platforms, and the ability to realize the full value of customer contracts as revenue. Many contracts are subject to termination for convenience, and the company faces a long and unpredictable sales cycle. COVID-19 remains an uncertain factor, and Palantir has outstanding investment commitments of $226.5 million. GAAP losses, deferred revenue decline, and continued reliance on stock-based compensation adjustments are the key items investors will watch as the company tries to convert its commercial momentum into durable earnings.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $392.1M | $375.6M | +4.4% | $289.4M | +35.5% |
| Gross profit | $305.3M | $284.7M | +7.2% | $140.0M | +118.1% |
| Gross margin | 77.9% | 75.8% | +2.1 pp | 48.4% | +29.5 pp |
| Research & development | $94.3M | $110.5M | -14.7% | $313.9M | -70.0% |
| Sales & marketing | $153.4M | $162.4M | -5.5% | $334.9M | -54.2% |
| General & administrative | $149.5M | $158.0M | -5.3% | $339.0M | -55.9% |
| Total operating expenses | $397.3M | $430.9M | -7.8% | $987.8M | -59.8% |
| Operating income (loss) | -$91.9M | -$146.1M | +37.1% | -$847.8M | +89.2% |
| Operating margin | -23.4% | -38.9% | +15.5 pp | -293.0% | +269.5 pp |
| Net income (loss) | -$102.1M | -$138.6M | +26.3% | -$853.3M | +88.0% |
| Net margin | -26.1% | -36.9% | +10.8 pp | -294.9% | +268.8 pp |
| Diluted EPS | -$0.05 | -$0.07 | +$0.02 | -$0.94 | +$0.89 |
| Customers | 203 | 169 | +20.1% | 132 | +53.8% |
Risks
Top three customers accounted for 18% and 27% of revenue for the nine months ended September 30, 2021 and 2020, respectively. Certain customers have reduced spend or terminated agreements, requiring refunds of previously paid amounts.
Sales cycle often lasts six to nine months but can extend to a year or more, with significant upfront investment in pilot deployments at no or low cost. This contributes to unpredictable quarterly results and cash flows.
The majority of customer contracts are subject to termination for convenience with notice periods of generally three to six months. Customers may also not renew or may renew for shorter lengths or reduced scope, adversely affecting revenue.
Risks include declines in U.S. and other government budgets, changes in spending priorities, delays in contract awards, use of continuing resolutions, and the prohibition on the U.S. federal government from exercising contract options more than one year in advance.
Highly dependent on continued contributions of management, particularly CEO Alexander Karp. Difficulty hiring and retaining qualified personnel, especially engineering personnel in competitive markets, could harm business and delay product development.
Intense competition from large enterprise software companies, government contractors, and system integrators, many with greater resources, broader product lines, and larger sales budgets. Could lead to fewer orders, reduced margins, and loss of market share.
Historically, first quarter has lower sales, with increases in subsequent quarters, including substantial increases during third and fourth quarters ending September 30 and December 31, due to government and commercial fiscal year ends. This may cause fluctuations in results of operations and cash flows.
The COVID-19 pandemic may continue to significantly affect business and operations. While to date it has not had a material adverse impact, economic consequences have been challenging for certain customers and prospective customers.
Issues raised by the use of artificial intelligence in platforms may result in reputational harm or liability.
Multi-class structure, Founder Voting Trust Agreement, and Founder Voting Agreement concentrate voting power with Founders, limiting other stockholders' influence and potentially affecting decisions on matters submitted to a vote.
We have made and may continue to make strategic investments in privately-held and publicly-traded companies as well as alternative investments, and we may not realize a return on these investments.
We will be required to provide an annual management report on the effectiveness of internal control over financial reporting and our independent registered public accounting firm will need to attest starting with the 10-K for the year ending December 31, 2021. Limited accounting personnel and public company experience could lead to deficiencies.
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
Total remaining deal value
Summary, forecast, risks and KPIs are extracted from Palantir Technologies Inc.'s SEC filings for Q3 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.