Q4 2024 Palantir Technologies Inc Earnings Call

During the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements regarding our first quarter and fiscal 2025 results, management's expectations for our future financial and operational performance, and other statements regarding our plans, prospects, and expectations.

These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results.

Information concerning those risks is available in our earnings press release distributed after the market closed today and in our SEC filings. We undertake no obligation to update forward-looking statements except as required by law.

Further, during the course of today's call, we will refer to certain adjusted financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, GAAP measures.

Additional information about these non-GAAP measures, including reconciliation of non-GAAP to comparable GAAP measures, is included in our press release and investor presentation provided today.

Our press release, investor presentation and other earnings materials are available on our investor relations website at investors.palantir.com.

Over the course of the call, we will refer to the various growth rates when discussing our business. These rates reflect year-over-year comparisons, unless otherwise stated.

Speaker Change: Joining me on today's call are Alex Karp, Chief Executive Officer, Shyam Sankar, Chief Technology Officer, Dave Glazer, Chief Financial Officer, and Ryan Taylor, Chief Revenue Officer and Chief Legal Officer. I'll now turn it over to Ryan to start the call.

2024 was nothing short of incredible for Palantir.

Speaker Change: Our momentum accelerated through year-end, closing out 2024 with exceptional Q4 results, including an extraordinary top-line beat and outperformance led by our U.S. business.

Speaker Change: Revenue grew 14% sequentially and 36% year-over-year in Q4 and 29% year-over-year for the full year.

Speaker Change: The AI revolution continues, transforming industries and redefining how organizations operate.

Speaker Change: AI is a pivotal component in driving innovation and efficiency, something companies need to embrace or fall behind.

Speaker Change: With the proliferation of AI models, the raw AI labor supply is exploding.

Speaker Change: The rapid emergence of quantified exceptionalism for organizations able to unlock the potential of these commoditized models through AIP.

Speaker Change: A byproduct of our incredible progress, our Rule of 40 score increased to 81 in the fourth quarter.

Speaker Change: It's a substantial leap to deploy LLMs into production with real impact.

Speaker Change: Most organizations are currently stuck on the wrong side of the widening chasm, working on their two, five, and ten-year plans, which become obsolete days later, failing to ever take action, but not Palantir or our quickly growing customer base.

Speaker Change: We've taken our position through our decades-long investment in developing the ontology, which allows organizations to seamlessly weave LLMs into their enterprise, unlocking their highest potential leverage.

Speaker Change: In this AI revolution, anyone looking for a solution that actually works is going to choose Palantir.

Speaker Change: Last quarter alone, we closed $1.8 billion of TCV across our business, which represents a 56% increase year-over-year. We closed a record-setting number of deals in Q4, including 32 deals worth $10 million or more.

Speaker Change: Our U.S. business is at the forefront of the AI revolution, growing 52% year-over-year in Q4.

Speaker Change: Last quarter, U.S. commercial revenue grew 64% year-over-year and 20% sequentially.

Speaker Change: AIP continues to fuel new customer acquisition as we have nearly five times the number of US commercial customers as we did three years ago and significant expansion opportunities at existing customers.

Speaker Change: Organizations who have crossed the chasm with Palantir are driving real impact quickly. In this AI revolution, the biggest risk is not moving fast enough, and organizations are looking to us.

Speaker Change: With Palantir, as soon as work begins, we're delivering real, quantified exceptionalism for our customers. In my conversations, they're excitedly asking how we can replicate this success across their organizations.

Speaker Change: One of America's largest pharmacies has been a customer since early 2024 and signed a $67 million TCV engagement with us right after the pilot for workflows including automatically load-balancing prescription fulfillment and orchestrating patient outreach.

Speaker Change: An American telecom company became a customer approximately two years ago and recently signed a $40 million TCV expansion deal to help manage and accelerate their decommissioning of old network technologies and equipment in order to achieve significant cost savings.

Speaker Change: Last earnings call, we mentioned the leading global insurance organization that deployed AIP to help automate underwriting workflows, reducing a two-week process to three hours. That organization signed a nearly $11 million ACV expansion deal in Q4.

Speaker Change: Panasonic Energy North America is seeing the effects of its AIP expansion as they've created a maintenance assistant to help 350 technicians in making 5.5 million batteries per day, resulting in reduced machine downtime, greater throughput, and rapid onboarding of new technicians.

Speaker Change: In Q4, we also announced the customers in the inaugural Warp Speed cohort, which are using Palantir's Warp Seed to gain an advantage in aspects of their manufacturing operating system, including automated visual quality inspections and dynamic production scheduling.

Speaker Change: Anderl CIO Tom Bosco noted quote, by using the software we've seen up to 200x efficiency gain in our ability to anticipate and respond to supply shortages.

Speaker Change: Our U.S. government business, the foundation on which Palantir was built, is exceedingly strong, with revenue growing 45% year-over-year last quarter.

Speaker Change: We take pride in supporting the critical missions we're delivering against.

Speaker Change: Notable deals included the U.S. Army extending its long-standing partnership with Palantir to deliver the Army Vantage capability in support of the Army Data Platform for up to four years.

Speaker Change: We also announced our recent contract expansion with U.S. Special Operations Command, marking the first deployment of Mission Manager to U.S. Special Operations Forces units.

Speaker Change: Our international commercial business continues to see pockets of growth alongside the large renewals of some of our long-standing customers.

Speaker Change: For example, Rio Tinto extended their partnership with Palantir for an additional four years, noting AIP is making their unstructured data accessible, allowing them to quickly attack problems previously deemed too complex.

Speaker Change: Using our software, Network Rail Specialists coordinate 53 driverless trains, each with 240 wagons, ultimately improving throughput and safety.

Our international government business also achieves strong growth.

Speaker Change: Revenue increased 26% sequentially last quarter driven in large part by the UK including our work with the NHS to roll out the federated data platform as 87 acute NHS trusts

Speaker Change: and 28 integrated care boards have signed up to use it as of November 2024.

Speaker Change: We accelerated through the end of the year and we remain full throttle. We're at the dawn of this AI revolution and in this winner-take-all AI economy, Palantir leads the way. I'll now turn it over to Shyam.

Shyam: Thanks Ryan. For the last two years we've been saying that even while the LLMs are improving, the models across both open and closed source are becoming more similar and performance will converge. All while the cost per token for inference continues to drop substantially and that's because the market's been focused on AI supply, the models.

Shyam: With the release of DeepSeek R1, that has gone from a contrarian position to consensus. It's now blindingly obvious to everyone. Our foundational investments in ontology and infrastructure have positioned us to uniquely deliver on AI demand.

Shyam: From the beginning, AIP was built for this reality. Chat was always a dead end. Instead, we viewed LLMs as a new runtime for the AI labor. To capture the productive value of this AI labor, you need an intermediate representation of your enterprise that AI can actually interact with.

Shyam: How do you allocate inventory, onboard customers, process claims, call for prior authorization, and the like? That intermediary representation that makes all of that possible is ontology. And that's why it's been the secret to our meteoric rise.

Shyam: We are convinced the normative value for AI is enterprise autonomy, the self-driving company. Users go from performing the workflow to supervising an army of agents, teaching them how to handle edge cases and reducing dwell time. This is where we are maniacally focused with our customers.

Shyam: We've been working with a large multinational bank to automate core back office processes. What used to take five days now takes three minutes.

Shyam: Much more than the labor savings, this improvement eliminates historical constraints on the middle office and now enables the bank to create entirely new and differentiated financial products.

Shyam: We're working with the top engineering and construction firm to automate the identification of risks across tens of thousands of pages of technical documents, replacing months of arduous manual reviews with AI labor that can flag major risks to engineers in minutes.

Shyam: and we're working with a large power systems company to automate the understanding of technical diagrams to turn them to quotes into orders.

Shyam: And finally, we're working with an automotive supplier to analyze CAD files for component designs to have AI labor validate engineering standards and manufacturability checks. That is a 100-hour process for human engineers, now automated and serving up exceptions for human review.

Shyam: The before and after with AI is stark, and the speed of implementation is accelerating.

Shyam: You can divide companies up into two categories, the quick and the dead.

Shyam: Turning to warp speed, Palinger's modern American manufacturing operating system, it continues to move at warp 10.

Shyam: Our nation is in the beginning of a great reindustrialization as we compete with China to secure a free world and individual liberties. This is a competition we cannot afford to lose. We announced our first cohort of Warp Speed customers, including Andrew and L3Harris. The response has been exceptional and the pipeline is swelling.

Shyam: WarpSpeed integrates engineering, test, production, quality, and operations so that manufacturers can build better and build faster.

Shyam: Our FedStart offering hit a major milestone with the approval of our FedRAMP High Environment for FedStart customers. This is radical acceleration, both in reduction of time and cost of market access for software companies in the federal space.

Shyam: Finally, in U.S. government, our deep investments in CJADC2 continue to deliver results. MAVEN continues to see significant adoption in its path finding new AI capabilities throughout the kill chain.

Shyam: Substantial new investments integrating contested logistics into Maven's AI-enabled kill chain met their moment in exercises in Q4.

Shyam: Adoption continues within the military departments, specifically Army, Air Force, and Space Force, as well as at the Combatant Commands with expansions at SpaceCom, SouthCom, Africom, and StratCom.

Shyam: While Hurricane Helene response galvanized the adoption of MAVEN on UNCLASS beyond just the secret and top-secret networks, the adoption has continued to grow as MAVEN is used for securing our nation's border and securing our nation's airspace by enabling drone domain awareness.

Shyam: And Maven is reaching our allies and partners via U.S. supplied capabilities called Maven RHEL, all spurred by real-world events and the need to collaborate in real-time in crisis.

Shyam: We are really just getting started with MAVEN and have an ambitious roadmap and a set of customer opportunities in front of us to deliver the unfair advantage our warfighters deserve. I'll turn it over to Dave to talk us through the numbers.

Dave: Thanks Shyam. We had an outstanding fourth quarter. Revenue growth accelerated to 36% year-over-year, exceeding the high end of our prior guidance by over 900 basis points and representing a 1600 basis point increase compared to the growth rate in Q4 of last year.

Dave: America continues to rapidly embrace the AI revolution and we saw this unrelenting demand drive impressive outperformance in our U.S. business which grew 52% year-over-year and 12% sequentially.

Dave: Our U.S. commercial business grew 64% year-over-year and 20% sequentially, and our U.S. government business grew 45% year-over-year and 7% sequentially.

Dave: On the back of this continued strength, we are guiding to a full year 2025 revenue midpoint of $3.749 billion, representing a 31% year-over-year growth rate.

Dave: We deliver these outstanding top-line results while expanding adjusted operating margin to 45%, the strongest adjusted operating margin in the company's history.

Dave: Our revenue and profitability drove a 13-point sequential increase to a Rule of 40 score from 68 in the third quarter to 81 in the fourth quarter.

Dave: We also had an exceptional cash flow quarter, with adjusted free cash flow of $517 million, representing a margin of 63%, and $1.25 billion in adjusted free cash flow for the full year, representing a margin of 44%.

Dave: Turning to our global top-line results, fourth quarter revenue grew 36% year-over-year and 14% sequentially to $828 million.

Dave: Full year revenue grew 29% year-over-year to $2.87 billion. Full year U.S. revenue grew 38% year-over-year to $1.9 billion.

Dave: Excluding impact of revenue from strategic commercial contracts, fourth quarter revenue grew 39% year-over-year and 14% sequentially and full year revenue grew 32% year-over-year. Customer count grew 43% year-over-year and 13% sequentially to 711 customers.

Dave: Revenue from our largest customers continues to expand. Fourth quarter trailing 12-month revenue from our top 20 customers increased 18% year over year to $65 million per customer.

Now moving to our commercial segment.

Dave: Fourth quarter commercial revenue grew 31% year-over-year and 17% sequentially to $372 million.

Dave: Full-year commercial revenue grew 29% year-over-year to $1.3 billion. Excluding the impact from strategic commercial contracts, fourth-quarter commercial revenue grew 37% year-over-year and 18% sequentially, and full-year commercial revenue grew 36% year-over-year.

Dave: We had our strongest quarter of commercial TCV booked at $995 million, representing 42% growth year-over-year and 63% growth sequentially.

Dave: Our U.S. commercial business is seeing unprecedented demand, with AIP driving both new customer conversions and existing customer expansions in the U.S. Fourth quarter U.S. commercial revenue grew 64 percent year-over-year and 20 percent sequentially to $214 million.

Dave: Full-year U.S. commercial revenue grew 54% year-over-year to $702 million. Excluding revenue from strategic commercial contracts, fourth-quarter U.S. commercial revenue grew 76% year-over-year and 19% sequentially, and full-year U.S. commercial revenue grew 69% year-over-year.

Dave: We also had our strongest quarter of U.S. commercial TCV booked at $803 million, representing growth of 134% year-over-year and 170% sequentially.

Dave: This exceeded our next highest quarter of U.S. commercial TCV books by nearly 400 million, highlighting the increased demand for AI production use cases.

David Glazer, David Glazer, David Glazer,

Dave: Total remaining deal value in our U.S. commercial business grew 99% year-over-year and 47% sequentially.

Dave: Our U.S. commercial customer count grew to 382 customers, provoking growth of 73% year-over-year and 19% sequentially.

Dave: Fourth Quarter International Commercial Revenue grew 3% year-over-year and 15% sequentially to $158 million, partially driven by revenue catch-up from a customer in Asia. Full Year International Commercial Revenue grew 9% year-over-year to $594 million.

Dave: For international commercial business, we continue to capitalize on targeted growth opportunities in Asia, the Middle East, and beyond, but remain focused on accelerating our growth in the U.S. commercial business.

Dave: Revenue from strategic commercial contracts was $9.6 million for the quarter. We anticipate first quarter 2025 revenue from these contracts to decline to between $4 to $6 million compared to $24 million in the first quarter of 2024.

Dave: We anticipate 2025 revenue from these contracts to be approximately half of 1% of full year revenue.

Dave: Shifting to our government segment, fourth quarter government revenue grew 40% year-over-year and 11% sequentially to $455 million. Full year government revenue grew 28% year-over-year to $1.57 billion.

Dave: Fourth quarter U.S. government revenue grew 45% year-over-year and 7% sequentially to $343 million.

Full-year U.S. government revenue grew 30% year-over-year to $1.2 billion.

Dave: This acceleration was driven by continued execution in existing programs and new awards reflecting the growing demand for AI in our government software offerings.

Dave: Fourth quarter international government revenue grew 28% year-over-year and 26% sequentially to $112 million. Bolstered by our continued work in UK health care and defense.

Dave: Full year international government revenue grew 23% year-over-year to $372 million.

Dave: Fourth quarter TCV book was $1.79 billion, a 56% year-over-year and 63% sequentially.

Dave: As net dollar retention does not include revenue from new customers that were acquired in the past 12 months, it has not yet fully captured the acceleration and velocity in our U.S. business over the past year.

Dave: We ended the fourth quarter with $5.43 billion in total remaining yield value, an increase of 40% year-over-year and 20% sequentially, and $1.73 billion in remaining performance obligations, an increase of 39% year-over-year and 10% sequentially.

Dave: As a reminder, RPO is primarily comprised of our commercial business, as it does not take into account contracts with an initial term of less than 12 months and contractual obligations that fall beyond termination for convenience clauses, both of which are common in most of our government business.

Dave: Turning to Margin and Expense. Adjusted gross margin, which excludes stock-based compensation expense, was 83% for the quarter and the full year.

Dave: Adjusted income from operations, which excludes stock-based compensation expense and related employer payroll taxes, was $373 million, representing adjusted operating margin of 45%.

Dave: Full Year Adjusted Income from Operations was $1.13 billion, representing a margin of 39%.

Dave: Q4 adjusted expense was $455 million, up 1% sequentially and 14% year-over-year, and full-year adjusted expense was $1.74 billion, up 9% year-over-year, primarily driven by our continued investment in AIP and technical talent.

Dave: We expect to see a more significant increase in expense in 2025 as we invest in technical hires, the product pipeline, and continue our focus on AI production use cases, all while delivering our goals of sustained GAAP profitability.

Dave: On the back of the strength of our results, we want to congratulate our employees for the successful delivery of their market-vesting stock appreciation rights, or SARs. As a result of this achievement, we accelerated $131 million of one-time expense in the fourth quarter related to these equity awards.

Dave: Fourth quarter stock-based compensation expense was $282 million, and employer-related equity tax expense was $80 million. Full-year stock-based compensation expense was $692 million, and employer-related equity tax expense was $126 million.

Dave: Fourth quarter GAAP operating income was $11 million, representing a margin of 1%.

Dave: Fourth quarter operating income, when excluding one-time SAR-related expenses, was $142 million, representing a 17% margin.

Dave: Full Year Gap Operating Income was $310 million, representing an 11% margin.

Dave: Full year operating income, when excluding one-time SAR-related expenses, was $442 million, representing a 15% margin.

Dave: Fourth quarter GAP net income was $79 million, representing a 10% margin. Fourth quarter net income, when excluding one-time SAR-related expenses, was $165 million, representing a 20% margin.

Dave: Full year gap in income was $462 million, representing a 16% margin.

Dave: Fourth quarter GAAP earnings per share was $0.03, and earnings per share when excluding one-time SAR-related expenses was $0.07.

Full year gap earnings per share was 19 cents.

Dave: Fourth quarter adjusted earnings per share was 14 cents. Full year adjusted earnings per share was 41 cents.

Dave: Additionally, our combined revenue growth and adjusted operating margin accelerated to 81% in the fourth quarter, a 13-point increase to our Rule of 40 score from the prior quarter.

Dave: Turning to our cash flow, in the fourth quarter, we generated $460 million in cash from operations and $517 million in adjustable cash flow, representing margins of 56% and 63% respectively.

Dave: For the full year, we generated $1.15 billion in cash from operations and $1.25 billion in adjusted-fee cash flow, representing margins of 40% and 44% respectively.

Dave: Through the end of the fourth quarter, we repurchased approximately 2.1 million shares as part of our share repurchase program. As of the end of the quarter, we have $936 million remaining of the original authorization.

Dave: We ended the quarter with $5.2 billion in cash, cash equivalents, and short-term U.S. Treasury securities.

Dave: Now, turning to our outlook. For Q1 2025, we expect revenue of between $858 and $862 million, and adjusted income from operations of between $354 and $358 million.

For full year 2025, we expect

Dave: Revenue of between $3.741 billion and $3.757 billion U.S. commercial revenue in excess of $1.079 billion representing a growth rate of at least 54%

Dave: Adjusted income from operations of between $1.551 billion and $1.567 billion Adjusted re-cash flow of between $1.5 billion and $1.7 billion

Alex/Ana: and GAAP operating income and net income in each quarter of this year. With that, I'll turn it over to Alex for a few remarks and then Ana will kick off the Q&A.

The End

Speaker Change: Welcome to our Palantir revolution, otherwise known as our earnings call.

Alex/Ana: There really is a lot of debate about with these numbers if you even should have an earnings call.

Thank you.

Alex/Ana: There was also a lot of debate around which number is the best internally. We were undecided whether our 29% growth in aggregate

Alex/Ana: are 38% growth in the U.S., are 54% growth in U.S. commercial, are rule of 81. They may have to redo the rule, because, you know, when you're doing twice the rule, of course.

Alex/Ana: Maybe the rule isn't fair to other companies, we may have to have a different rule, the rule of 70 or something, but we blew through that over twice, the rule of 40.

Alex/Ana: To say we did it our way is a minimization of what that meant.

We have taken a long bet over decades.

around the assumption that...

Alex/Ana: if we built the products that our partners, most importantly our partners in the West

Most importantly, our partners in the U.S.

Alex/Ana: ought to build, not what they wanted us to build, not what they mandated we should build, not what investors, venture capitalists, or analysts were saying they would reward us for building.

Alex/Ana: that that company would generate so much value, uh, that we would get a small percentage of that and we would end up as a massive.

Alex/Ana: things that weren't working, rebuild the whole infrastructure of a company. We did that with many platforms.

Alex/Ana: Most successfully, however, was our interest in figuring out how to power

Alex/Ana: human-driven analytics with the assumption that what ought to come would not be human-driven, i.e. would be AI at some point, and that AI potentially could be something like a large language model.

Alex/Ana: and what we've delivered to the market is a symbiotic relationship between data, computer, LLMs, organized, powered, made possible, made valuable by something we dare to call an ontology which was in the beginning viewed as a highly obnoxious

Alex/Ana: anti-comatic term that people thought we were using to obfuscate bad financials.

Speaker Change: Thank you for watching. If you liked this video, please subscribe. Also, check out these other videos. Thanks for watching.

Speaker Change: And that ontology and our willingness to stick to our guns, again, because there's been...

Billions and billions and billions of dollars invested.

in large language models.

Speaker Change: The idea that you could dare to build a product that was built on the assumption that the power of large language models would be in their ability to operationalize them in the context of the enterprise in common language.

Speaker Change: That was a revolution that we saw, that we built against, that we've led, that we've gotten off the ground for us in America. We have 54% growth in U.S. com.

Speaker Change: We, by the way, USG is now re-accelerated. It grew 30%.

We are guiding above 30% at 31%.

Speaker Change: And we're doing this in a very, very complicated environment, you know. The part of the reason we've done so well is the experts look to the past as an indication of the future when we're looking to the future as an indication of the present. And it's very, very hard to figure out what's going to happen. We see, as much as I personally care about the broader West, including continental Europe,

Speaker Change: Despite our best efforts and working every day, it's anemic. We're growing around 4% on 13% of our company. It does look like the continent of Europe will look to the past as a way of getting to the future.

Speaker Change: struggles with the idea that all the valuable technology in this area is built in America, perhaps struggles with the fact that to make LLMs work you have to find a way to build something like an ontology. There's one available at Palantir.

Thank you very much.

Speaker Change: We have rejected all the way through anti-numericocratic concepts, anti-transparent concepts. We're at the forefront of civil liberties. One of the reasons ontology is so valuable is because the concepts that we built into PGA, that we built into Foundry, that are expressed in branching, are concepts that both accelerate revenue, it get and decelerate, control capex, i.e. make the margins, something like what you would find

Speaker Change: at Palantir, but do it in a way that actually makes the enterprise better, healthier, more ethical.

Speaker Change: We at the end of the day at Palantir are exporting our culture and way of doing things to enterprises, especially in America, by allowing enterprises to capture their tribal knowledge in a way that they can utilize LLMs, i.e. take the commodity side of LLMs and hypercharge their specialized, their secrets of their enterprise.

using the secrets of our enterprise.

Speaker Change: namely, how do you build product, how do you end up with ontology, how do you implement it, and last not least, we believe

Speaker Change: We are making America more lethal, making our adversaries increasingly afraid of acting against the interests of America, and especially Americans. And we are proud of our moral stance, and we are very long on the U.S. and what's happening and what will happen in the future.

Speaker Change: With that, we should open up our earnings call. This is obviously a very, very special time to be a Palantir. Palantirians are very excited.

Speaker Change: Yeah, it's by far the best time to be a Pounder. One of the things that's crazy important about our time Pounder now is...

Speaker Change: It's actually the vibe internally, the vibe with our clients, the vibe inside of our products is we are at the way beginning of our trajectory, we are at the way beginning of a revolution, and we plan to be a cornerstone, if not the cornerstone company, in driving this revolution in the U.S. over the next

three to five years.

Speaker Change: Thanks Alex. We'll now turn to a few questions from our shareholders before opening up the call. Our first question is from Christina who asks, what is so unique about the ontology? How does it give you an edge over your competitors and why wouldn't any of them be able to recreate something similar?

Thank you for watching!

Speaker Change: Well, thank you, Christina, for the question. I think we could start by thinking about if I was building software to solve problems for one company, well, you don't need an ontology. You just take the shortest path between A and B, and that doesn't involve ontology.

Speaker Change: You could think about, okay, what if I'm building enterprise software for many customers? In a traditional way, not a forward-deployed engineering way, where I have, I'm thinking about it deductively, I have large multi-year implementations, never mind that those things never work, but the traditional software industrial complex. You're not even going to conceive of ontology.

Speaker Change: But if you have the ambition to build software that works across government, across 50 different industries, you have to build ontology. It is absolutely the longest path between point A and point B, but it gives you superpowers when you show up to your customers.

Speaker Change: And it gives your customers superpowers when they're managing the change in their enterprise, mergers and acquisitions, fighting the entropy of the universe, competing in the market.

Speaker Change: But what makes ontology essential is AI. Ontology ends up being the intermediary representation.

Speaker Change: that makes your enterprise accessible to AI in a way that's governed and secure and provides you the observability that you need so you can actually trust the AI. But more importantly, the observability your regulators need so they can trust in your transition to being a self-driving company.

Thank you for watching!

Speaker Change: And it also allows you to manage them so that the actual taxonomy and ability to put the large language model where it can be more exact so it can be managed at scale. You can think of it as what we do on the Foundry back end where we have to create pipelines

Speaker Change: It was basically anti-segmenting the data. To get the AI to actually work in an enterprise, you have to re-segment, re-concatenate the large language models in a way where the use case is thin enough that they can actually provide.

Speaker Change: exact enough information and the concatenation of that is exact enough to provide real results in an enterprise context, meaning you can rely on the large language model to do the same thing 500 people would be doing who are experts in dealing with text, and you can do that with three people.

and then the question that Shyam is getting...

Speaker Change: is answering is also, but why is it hard to build it? So now we know that Palantir is succeeding and has this, you know, pick your stat rule of 81, growth with no, basically a nascent sales force. It's actually very hard to build because in order to have an idea how to do this, you would have to have taken all the lessons of every single product we built, including security models, including how do you interact with the data of an actual enterprise? How do you impose branching? And then you'd have to interact with that.

Speaker Change: and build something to work with the large language models not as they

Speaker Change: and not as you thought they were, not as you'd like them to be, but as they are.

Speaker Change: And that process probably will begin for lots of companies now. It is a very long and hard process to do this in a productized form.

Speaker Change: And one of the reasons people didn't figure this out is because tech companies...

Speaker Change: don't actually need this because they have one company and or they have something but it is not a product.

Speaker Change: taking this from one company to a company that can install us anywhere requires a very specialized, dedicated, product-building culture with deep understandings of understanding the enterprise. Last not least...

Speaker Change: In order to be able to teach the large language model to get more exact, precise information, you would have to have a secure and cleaned access to the underlying data of the enterprise. No other company in the world has that kind of access like Palantir, and that's why we're completely uniquely positioned to do this.

Speaker Change: And luckily for the world, we're a very long America, and we're doing it primarily here because it's powerful as fuck.

Speaker Change: Thank you both. Our next question is from Kamal who asks, how will the new Chinese AI model DeepSeek impact Palantir and how can Palantir mitigate its impact?

Thank you for watching.

Speaker Change: Well, I think one of the obvious lessons of DeepSeek R1 is something that we've been saying for the last two years which is that the models are commoditizing. Yes, they're getting better across both closed and open, but they're also getting more similar and the price of inference is dropping like a rock. But I think the real lesson, the more profound one, is that we are at war with China. We are in an AI arms race.

Speaker Change: And I got into a disagreement with Sam Altman about this at the Senate AI Summit over a year ago where I was arguing that we are in an AI arms race and there's an opposing view that we can all get along and we can cooperate on these things and I'm sure the other side feels quite different realizing that their IP has been stolen in this process here.

Speaker Change: But this war started long ago. It was an economic war with the ascension of China to the World Trade Organization, the greatest IP theft in history, the greatest wealth transfer in history. It is an opium war. The number one cause of death of 18 to 45 year olds in this country is fentanyl.

Speaker Change: that is coming from China. It is a diplomatic war. The Belt and Road Initiative is basically indentured servitude for other countries to the CCP here. And the unprecedented phase zero gray zone operations of the CCP, how many times are we going to believe that anchors are dragged across the sea that cut undersea cables here?

Speaker Change: But I think one of the things, you know, China knows they're at war, the question is, we kind of equivocate on it as a peace-loving nation.

Speaker Change: But one of the things I want to make sure we all do realize is that...

Speaker Change: The engineering in R1 is exquisite. The optimizations that they've done are.

Speaker Change: Really impressive and I don't think you can get away with the facile explanation that the Chinese just copy and we're the only innovators We have to wake up with the respect for our adversary and realize that we are competing

Speaker Change: But they absolutely did steal a lot of that through distillation of the models, and perhaps they stole even more. And then you can look at the GPU sales growth in Singapore. It's a tiny island nation. I'm pretty sure there's some sanctioned invasion going on there.

Speaker Change: And we have to realize that the AI race is winner-take-all, and it's going to be a whole-of-nation effort that extends well beyond the DoD in order for us as a nation to win. And that M-Day was yesterday. The time to mobilize has come.

Thank you for watching!

Speaker Change: Thank you Shyam. Our next question is from Dan with Wedbush. Dan please turn on your camera and then you'll receive a prompt to unmute your line.

Thank you for watching!

Thank you.

So.

Thank you.

Speaker Change: Thank you. I appreciate it. Thank you. Thank you. Thank you.

Speaker Change: by the way Dan we don't talk about are you surprised at all

Can you repeat the question? We didn't hear you.

Thank you. Yeah. Are you surprised at how quick...

Speaker Change: These sales cycles are actually taking place from when a customer first meets Palantir to now deploying AI initiatives. I mean is that surprise the team at all?

Speaker Change: I would say I'm not surprised because of the energy we feel on the ground in talking to customers and the impact you know Shyam shared some examples taking you know a back office process from the largest banks from five days to under three minutes taking what used to you know automating a process for an automotive supplier from what used to take a hundred hours to be automated with just a human check and seeing the reactions of those customers when those are implemented and seeing the impact and seeing them wanting to move quickly

Speaker Change: they are always coming to push us down, they are always coming to push us down, they keep telling us well we are just selling anything or many things and we make goodnews they keep telling us we make goodnews they keep telling us and they're not going to teach us how to earn it. If we listen to their jargon and the jargon that they are telling us and the jargon that they are telling us then we make good news out of that. The problem is always the last jargon.

you know.

Speaker Change: customers and especially countries are just reacting completely differently so in broad swaths American companies have approached this revolution in a very pragmatic way which is you know so we had all these you know experts saying that what you ought to do is buy a large language model and install it on your enterprise

Speaker Change: And customers are like, great, we'll try that, but we're also going to try Palantir.

Speaker Change: And there's really no ideology in this, in aggregate, in this country defining how people do things.

Speaker Change: It's about output, how quick is that output, what is, and there are just, there's a lot of communication between enterprises in America, especially in sectors.

So people talk about what's working and what's not working.

Speaker Change: And in contradistinction, if you look at Europe, with 13% of our business and

Speaker Change: 4% growth rate last year. So compare that, it's like more than 10x better in America in U.S. com, right? And what's really happening there is people are reading literally basically PowerPoints of how you did tech installations in the 50s.

Speaker Change: and that's what they're doing. And what is jarring to me is that, you know, you just see adoption, radical adoption from some clients. Again, you do have some people in America who are still doing science projects, but it's...

Speaker Change: How could it be that one set of companies in one geography adopts

Speaker Change: And in a very culturally similar geography, people are just like, okay, great, but that's not how we do it.

and Joe.

Speaker Change: And this, by the way, is not just, you know, we talk a lot about U.S. commercial because we can't really talk in detail about what's happening on the battlefield.

Speaker Change: But the battlefield, and Shyam can talk about this basically forever, that this is basically we enjoy it, it's equally diversion. It's like you have cultures that are like, we have to fight in a way that suits our culture, that suits our ethics.

Speaker Change: We have a primacy of winning and a primacy of maintaining our values.

Speaker Change: and those cultures are rebuilding how they fight, rebuilding the things that they think are valuable, looking at the evidence of what worked, what didn't, what was the cost structure.

Speaker Change: And, meanwhile, there are just a lot of people who are just like, yeah, but that could get away in the way of vacation. And so it is really, really jarring. I think one of the things I am sympathetic with when investors look at Palantir is like, yeah, but it's very hard to know because—

I expected this to work in X amount of time.

Speaker Change: You got it to work and beat what I was expecting in 1-10th, 1-20th, 1-50th, the time. And by the way, the other thing is super surprising is

Speaker Change: You know, two, three years ago, when we were doing Foundry or even some of our kind of more sensitive things in the military, I believe we were delivering results that were, you know, in six months would have taken ten years and they were things that people couldn't do. But now, because of the time and the power,

Speaker Change: You can't really hide it as easily in some department of your enterprise. So, what would happen to us in the past...

Speaker Change: is we would do a pilot, we'd do an enterprise thing, and because obviously people didn't appreciate our, my charm, and there were no steak dinners, and we weren't laughing at your jokes, and we were probably saying the wrong things at the wrong times, it, you, that thing got stuck in some part of the enterprise. Everyone knew it was the most important thing about the enterprise, but no one would acknowledge it.

Speaker Change: And now, it's just too powerful. People are like, yeah, yeah, I don't particularly like them. They don't offer dinners. They don't wear suits. Shyam's hard to understand for me.

But the results are massive.

Speaker Change: and that that's what's driving the results in the you that's what's driving the 54 number that we're guiding that we did last year and we're guiding to this year in U.S. commercial that's what's driving the beat.

Speaker Change: That's what's driving our ability to really maintain our culture. By the way, it's also the rule of 81 really comes from this reaction to our company, but also because we can stick to our culture, our ontology of Palantir. We do not need 500 extra people a quarter. We can really power these things because the pull, when people actually see it, is enough to break down the institutional barriers, the political bullshit that often we were not able to break through in the past.

Thank you for watching!

Thank you for watching!

Speaker Change: Thank you. Our next question is from Mariana with Bank of America. Mariana, please turn on your camera and then you'll receive a prompt to unmute your line.

Thank you for watching!

Good afternoon, everyone.

Speaker Change: So my first question is about disruption. Volunteer has been like actually thriving.

Speaker Change: when there is disruption, from the very beginnings of the company, 9-11, coronavirus, supply chains.

LLMs

Speaker Change: Now everyone is really concerned about DOJ, the change of administration.

Speaker Change: I could imagine like a focus on efficiencies, a focus on

Speaker Change: Software modernization, digitalization could actually be a really good opportunity for you. I don't know if you can deep dive on like how you balance your position to that. And my second question, probably to Dave, but like, I don't know, Shyam as well.

Speaker Change: When you see this demand, where do you invest to make sure that you're prepared to actually execute on it? Like, is it talent? Is it sales? Is it engineers? Is it partnerships? Like, what do you do to make sure that you can actually capture this opportunity?

Thank you.

Speaker Change: Well, on the first question here, I mean, I think no one really knows, and we sense a huge amount of fear amongst the traditional system integrators and providers here.

Speaker Change: the traditional providers to the monopsony, but we're pretty optimistic. And I think if you look at my.

Speaker Change: comments over the past, even my recent Senate Armed Service testimony last week, Pallenger's real competition is a lack of accountability in government. These forever software projects that

Speaker Change: cost an insane amount that don't actually deliver results. They're sacred cows of the deep state. You know, you can think about D-Sig-Zay. It cost billions of dollars and it didn't work. Soldiers and...

Speaker Change: Soldiers in war zones preferred Palantir because it worked, and it happened to only cost millions of dollars.

Speaker Change: And I think Doge is going to bring meritocracy and transparency to government. And that's exactly what our commercial business is. The commercial market is meritocratic and transparent, and you see the results that we have in that sort of environment. And that's the basis of our optimism around this.

Speaker Change: You know, I think the work that we've done in government, it's deeply operational, it's deeply valuable, and we're pretty excited about exceptional engineers getting in there under the hood and being able to see that for a change.

Speaker Change: We love disruption, and whatever's good for America will be good for Americans and very good for Boundaire. And I think you've got it exactly right. Disruption, at the end of the day, exposes things that aren't working. There'll be ups and downs. This is a revolution. Some people can get their heads cut off. It's like we're expecting to see really unexpected things and to win.

Speaker Change: Basically, that's what we're going to do. See unexpected things, report expected things, and win. And we're planning to do that, and we're pretty optimistic about the U.S. environment.

Thank you for watching!

Speaker Change: And on the investing front, it's like it is quality engineering, right? It's quality engineers, and you can see it sort of how we set up our comp programs, you know, sort of, and obviously, like that doesn't mean headcounts going to grow somewhat, but really, it is the quality engineers, you know, more than more than the quantity. And you'll continue to see us, you know, do that this year, we did it last year, particularly in the back half. And you're seeing it sort of in the numbers in Q1 and beyond.

Speaker Change: Also, by the way, for the first time people want to partner with us. It used to be partnership meetings were a complete waste of time and B.S.

Speaker Change: Like largely so people could fill out a report that they met with us kind of thing You know like high school dating for nerds. I met with them perfect. I'm not going out with them

Speaker Change: That was our experience with partnerships. Now, like in the last, even the last couple of weeks, I've had real partnership discussions because

Speaker Change: A lot of these people own verticals, have to deliver, they're under a lot of pressure, and people know how good our products are. And last not least, what we're really investing in, in my view, is where we have a truly unique...

Thank you. Thank you.

Speaker Change: Culture. I visit with companies every week. I've been doing it for 20 years. I've never seen a company or a culture anything like ours.

Speaker Change: And that's what we have to fight to keep and every single Palantirian is special. Everyone here is doing something unique. We need to continue to attract and retain people who are different, think differently, are different, and get them focused on the world's most important missions.

Speaker Change: building products the way we know how to build them, and that's our primary investment strategy. It's not actually a question of money, which, you know, means that that's how we crush the margins. It's about talent.

Speaker Change: and, you know, just building really great things, the things you ought to build, not the things you're supposed to build, and getting them to the front line.

Speaker Change: Thank you all. Alex, as always, we have a lot of individual investors on the line. Is there anything you'd like to say before we end the call?

Thank you for watching!

We're doing it!

Speaker Change: We're doing it, and I'm sure you're enjoying this as much as I am.

Speaker Change: Let's not talk to analysts about the burden of being right.

Speaker Change: are burdens of investing in ontology, are burdens of actually looking at the math, the burden of reading what the rule of 40 is.

Speaker Change: The burden of being honest about what an enterprise software company is or the burden of explaining to your friends that you're really happy.

Speaker Change: Maybe we should just stop talking about it. I'm very happy to have you along for the journey, and you are partners for us.

Every Palantirian, we are crushing it. Everyone else who's listening...

Speaker Change: We are dedicating our company. We have dedicated our company to the service of the West and the United States of America. And we're super proud of the role we play, especially in places we can't talk about. And we love our success in the U.S. and globally. Also, we are doing well in the United Kingdom and many other places.

Palantir is here

Speaker Change: to disrupt and make the institutions we partner with the very best in the world, and when it's necessary to scare enemies and on occasion kill them. And we hope you're in favor of that. We hope you're enjoying being a partner, and we're really happy and very, very focused on what we're doing. Thank you for your time.

Thank you. That concludes Q&A for today's call.

Speaker Change: We've always said never sell a house in the winter. That's not true.