Summary
Palantir reported third quarter 2023 results with revenue of $558.16 million, up 16.8% from the prior-year quarter. Year-to-date revenue reached $1.62 billion, up 15.7%. Gross profit was $450.24 million, up 21.6%, and gross margin was 80.7%, up 3.2 percentage points. The company posted operating income of $39.98 million, a swing to profit from an operating loss in the prior-year quarter, and operating margin was 7.2%, up 20.2 percentage points. Net income was $71.50 million, also a swing to profit, and diluted EPS was $0.03. This marked the fourth consecutive quarter of GAAP profitability and the third consecutive quarter of GAAP operating profitability.
Cash generation improved. Operating cash flow was $133.44 million in the quarter, up 183.5%, and year-to-date operating cash flow was $411.01 million, up 183.5%. Capital expenditures fell 89.2% to $1.56 million in the quarter. Adjusted free cash flow, a non-GAAP measure, was $141 million, representing a 25% margin. The company ended the quarter with no outstanding debt and $500.0 million available and undrawn under its credit facility. Deferred revenue was $489.60 million, up 6.2% from the prior-year quarter. Remaining performance obligations, or RPO, were $987.70 million, down 24.0%. The RPO decline is a watch item because it represents non-cancelable contracted revenue not yet recognized.
Adjusted income from operations was $163.3 million, a 29% margin. Adjusted EBITDA was $171.9 million, a 31% margin. These non-GAAP figures exclude stock-based compensation and related employer payroll taxes. The company continued to expand AIP, its Artificial Intelligence Platform, to select customers and onboard additional customers. Customer count grew 34% year-over-year to 453 customers as of September 30, 2023, compared with 337 a year earlier. U.S. commercial customer count grew 37%, from 132 customers in the third quarter of 2022 to 181 customers in the third quarter of 2023. In the first nine months of 2023, 56% of revenue came from government customers and 44% from commercial customers. U.S. customers represented 62% of revenue in that period, with non-U.S. customers at 38%.
Guidance points to continued growth. For the fourth quarter of 2023, Palantir expects revenue of $599 million to $603 million and adjusted income from operations of $184 million to $188 million. The company also expects GAAP net income in the quarter. For the full year 2023, Palantir raised revenue guidance to $2.216 billion to $2.220 billion. It raised adjusted income from operations guidance to $607 million to $611 million. Management continues to expect GAAP net income in each quarter of 2023. These targets are for the next quarter and the full fiscal year, respectively.
Risks remain. Government customers are subject to budget and spending uncertainties, changes in timing and priorities, and regulatory or policy shifts. Macroeconomic conditions, including inflation, interest rates, financial services sector instability, and foreign currency fluctuations, could pressure customers, especially early- and growth-stage commercial customers. The ongoing Russia-Ukraine conflict and the recent attack against Israel and ensuing conflicts add geopolitical uncertainty. A decline in RPO of 24.0% in the quarter could signal slower conversion of contracted backlog into revenue. The company also notes that many contracts include termination for convenience provisions, which can affect the realization of total contract value.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $558.2M | $533.3M | +4.7% | $477.9M | +16.8% |
| Gross profit | $450.2M | $426.4M | +5.6% | $370.3M | +21.6% |
| Gross margin | 80.7% | 80.0% | +0.7 pp | 77.5% | +3.2 pp |
| Research & development | $105.7M | $99.5M | +6.2% | $100.9M | +4.8% |
| Sales & marketing | $176.4M | $184.2M | -4.2% | $182.9M | -3.6% |
| General & administrative | $128.2M | $132.6M | -3.4% | $148.7M | -13.8% |
| Total operating expenses | $410.3M | $416.3M | -1.5% | $432.5M | -5.1% |
| Operating income (loss) | $40.0M | $10.1M | +296.9% | -$62.2M | +164.3% |
| Operating margin | 7.2% | 1.9% | +5.3 pp | -13.0% | +20.2 pp |
| Net income (loss) | $71.5M | $28.1M | +154.2% | -$123.9M | +157.7% |
| Net margin | 12.8% | 5.3% | +7.5 pp | -25.9% | +38.7 pp |
| Diluted EPS | $0.03 | $0.01 | +$0.02 | -$0.06 | +$0.09 |
| Customers | 453 | 421 | +7.6% | 337 | +34.4% |
Risks
The top three customers together accounted for 19% of revenue for the nine months ended September 30, 2023, compared with 17% for the nine months ended September 30, 2022, and customers can generally terminate contracts for convenience with three to six months notice.
Sales efforts are time-intensive, the sales cycle often lasts six to nine months but can extend to a year or more, and PLTR typically closes a large portion of sales in the last several weeks of a quarter, making results difficult to predict.
U.S. federal government contracts prohibit exercising contract options more than one year in advance, and budget delays, continuing resolutions, or a lapse in appropriations can adversely affect timely revenue recognition under government contracts.
As of December 31, 2022, total remaining deal value was $3.7 billion, but many contracts are subject to termination for convenience and PLTR has historically not realized all revenue from full deal value, which may result in lower than expected revenue.
Macroeconomic conditions including high inflation, rising interest rates, the Russia-Ukraine conflict, and the Hamas attack against Israel have disrupted customers, and MD&A states that early- or growth-stage customers may be unable to generate sufficient revenues or access financing, impacting expected revenue and collections.
PLTR states its revenue growth rate has declined in recent periods and may continue to decline due to macroeconomic factors, increased competition, slowing demand, contract terminations, and maturation of its business.
The market is intensely competitive, competitors may incorporate AI into competing products, and customers may be reluctant to purchase products incorporating generative AI, which could limit adoption of AIP.
PLTR is highly dependent on Alexander Karp and other key personnel, all executive officers are at-will employees, and difficulty hiring, retaining, and motivating personnel or volatility in the Class A common stock price could harm the business.
PLTR and certain officers and directors were recently sued in purported class action lawsuits and derivative lawsuits, which could result in substantial costs and divert management attention.
The multi-class structure, Founder Voting Trust Agreement, and Founder Voting Agreement concentrate voting power with the Founders, and future issuances of Class A common stock may dilute Class A voting power without diluting the Founders' voting control.
PLTR states the first quarter generally has relatively lower sales and sales increase in subsequent quarters, with substantial increases in the third and fourth quarters, partly due to U.S. government fiscal year end on September 30, which may cause fluctuations in results.
SaaS KPIs
All quarters →Adjusted Operating Margin
Adjusted Free Cash Flow Margin
Adjusted free cash flow
Adjusted income from operations
Adjusted EBITDA Margin
Contribution Margin
US Commercial Customer Count
Customer count growth
Summary, forecast, risks and KPIs are extracted from Palantir Technologies Inc.'s SEC filings for Q3 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.