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Palantir

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Operating costs grew at about a third of revenue's pace

Revenue rose 92.8% while operating expenses rose 34.2%, so operating margin widened to 47.1% from 26.8% a year earlier.

Q2 FY2026, the quarter to Jun 30, 2026 · 10-Q filed Aug 4, 2026

Q2 FY2026 · revenue
$1.9B+92.8% on the year
Operating margin
47.1%
Net income
$1.1B
Free cash flow, quarter
$1.2B

Largest source of revenue: Government, 51.2% of the total.

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Key insights · Q2 FY2026
  1. 01

    Operating costs grew at about a third of revenue's pace

    Revenue rose 92.8% while operating expenses rose 34.2%, so operating margin widened to 47.1% from 26.8% a year earlier.

    Why it matters

    Revenue rose 92.8% to $1.94B from $1.00B, while total operating expenses rose 34.2% to $726.6M and fell to 37.5% of revenue from 53.9%. Income from operations rose 238.6% to $912.0M from $269.3M. Every operating cost line shrank as a share of revenue: sales and marketing to 17.54%, research and development to 9.95%, and general and administrative to 10.05%, the slowest-growing line at 19.7%.1

    Gross profit grew faster than revenue, up 102.1% to $1.64B, as cost of revenue rose 53.9%. So both layers of cost lagged sales: the cost of delivering the software and the operating budget. The filing names stock-based compensation and payroll as the main drivers of the rise in sales and marketing, and third-party cloud hosting as the main driver of the rise in cost of revenue.1

    AnalysisMost of Palantir's costs are people and rented computing, and they do not need to grow with each new workflow inside an existing account. When revenue nearly doubles on a cost base that grows by about a third, most of the extra revenue reaches operating income. This is a reading of the figures, not a rate the company commits to.

    These are reported figures that include stock-based compensation. The company's own adjusted measures exclude it and show a higher margin. The filing also warns that employer payroll taxes on equity awards move with the share price, so part of the cost base can swing for reasons unrelated to customers.1

  2. 02

    One quarter out-earned all of fiscal 2024

    Operating income of $912.0M in one quarter far exceeded the $310.4M earned in all of FY2024, and revenue topped FY2022's full year.

    Why it matters

    Income from operations in the June quarter was $912.0M, against $310.4M earned across all of FY2024, and was 64.5% of FY2025's $1.41B. Quarterly revenue of $1.94B was 101.6% of FY2022's full-year revenue of $1.91B. In FY2022 the company still reported an operating loss of $161.2M; its first operating profit in this history was $120.0M in FY2023.1

    Quarterly operating income has risen in each of the last six quarters shown, from $11.0M in Q4 FY2024 to $176.0M, $269.3M, $393.3M, $575.4M, $754.0M and $912.0M. Over the same span quarterly revenue rose from $827.5M to $1.94B.1

    AnalysisThe jump is the operating leverage of the first finding compounded over two years: revenue kept stacking on a cost base that grew more slowly. The Q4 FY2024 and Q4 FY2025 figures are derived from annual totals less the first nine months, not reported as quarters.

  3. 03

    Free cash flow ran ahead of operating income

    Free cash flow of $1.20B beat operating income of $912.0M, partly because little capital goes in and noncash equity pay is added back.

    Why it matters

    Operating cash flow was $1.22B and capital expenditure $14.6M, leaving free cash flow of $1.20B, a margin of 62.1% against an operating margin of 47.1%. Operating cash flow was 1.15 times net income attributable to common stockholders of $1.06B. Capital spending took 1.2% of operating cash flow and 0.75% of revenue.1

    The filing's cash flow statement shows two items that push cash above income. Stock-based compensation is a noncash expense, so it reduces income but not cash. And contract liabilities, deferred revenue plus customer deposits, rose over the half year, because many customers pay before revenue is recognized ratably over the contract term. Rising accounts receivable worked the other way.1

    This is a pattern, not one quarter's timing. Free cash flow exceeded operating income in each of the eight quarters shown, from $415.8M against $113.1M in Q3 FY2024 to $1.20B against $912.0M now. A year earlier, free cash flow was $531.6M on revenue of $1.00B.1

    Cash flow does not carry the cost of equity pay; that cost appears instead in the share count. Diluted weighted-average shares were 2.57B against 2.56B a year earlier. The filing says quarterly cash flows have fluctuated significantly and that the timing of billing and payment varies from contract to contract.1

  4. 04

    Net income ran above operating income, on gains and low tax

    Net income of $1.07B was 116.9% of operating income, lifted by investment gains, interest and a tax charge of 1.4% of pretax income.

    Why it matters

    Pretax income of $1.08B included $77.5M of interest income, 7.2% of the total, and $91.8M of other income, 8.5%, up from $6.6M a year earlier. The filing attributes the other income to a realized gain and upward adjustments on privately held equity securities and unrealized gains on publicly traded ones. The tax provision was $15.4M.1

    The low tax charge reflects, among other factors, the full valuation allowance the company still holds against its U.S. and U.K. deferred tax assets because of its history of losses. The filing says there is a reasonable possibility that it releases all or part of that allowance, given its recent and anticipated earnings.1

    AnalysisNeither line is a property of the software business. Investment gains depend on the shares of other companies, and a tax charge this low reflects past losses rather than current economics. Operating income and free cash flow are the cleaner reads of the core business. A release of the allowance would bring a one-time gain to net income, followed by a fuller tax charge.

Sources

  1. 1.Palantir 10-Q for the period to 2026-06-30 (the filing), Aug 4, 2026, read Nov 2, 2026

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Business performance

Growth, profit and margin

Revenue went from $595.4M in FY2018 to $4.5B in FY2025, the operating margin from -104.7% to 31.6%, over 7 years.

  • Revenue$4.5B
  • Operating income$1.4B
  • Operating margin31.6%
Period
Q2 FY2026
Revenue
$1.9B
Operating income
$912.0M
Operating margin
47.1%
Net income
$1.1B
Free cash flow
$1.2B
Business performance

Does the profit turn into cash?

Q2 FY2026: free cash flow of $1.2B against net income of $1.1B in the quarter.

  • Operating cash flow$2.1B
  • Capital expenditure$33.9M
  • Free cash flow$2.1B
  • Net income$1.6B

Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.

Financial data and sources

How the revenue mix has shifted

Each breakdown the filing reports, as shares of revenue, for every period it restates.

Segments

Segment and Geographic Information - Summary of Financial Information for Each Reportable Segment (Detail). The filing restates this breakdown for 1 period.

Click a member to isolate it across the years shown.

The figures

Margins, cash and growth for the period, each with what it was computed from.

Gross margin
84.7%
Source10-Q, Derived from Gross profit and Revenue in the 10-Q filed 2026-08-04
Operating margin
47.1%
Source10-Q, Derived from Income from operations and Revenue in the 10-Q filed 2026-08-04
Net margin
54.9%
Source10-Q, Derived from Net income attributable to common stockholders and Revenue in the 10-Q filed 2026-08-04
Free cash flow, quarter
$1.2B
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-04
Free cash flow margin, quarter
62.1%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-04
Cash conversion, quarter
1.15x
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-04
Capital spending, quarter
0.8%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-04
Revenue growth
+92.8%
From the record's own history, against the prior year.

Where revenue comes from

Every breakdown the filing reports for the period, with each item's share.

Segments

Government$990.0M51.2%
Commercial$945.4M48.8%

Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-08-04

What it costs

The cost lines beneath operating income, each as a share of revenue, then the operating result.

Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.

Cost lineQ2 FY2026Of revenueSource
Cost of revenue$296.9M15.3%Source10-Q, us-gaap:CostOfRevenue, as reported in the 10-Q filed 2026-08-04
Income from operations$912.0M47.1%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-08-04

Operating figures the company states

From the text of the filing rather than its statements, each with the sentence that states it.

Average revenue per top-twenty customer (trailing twelve months)
$124.0M
As of Jun 30, 2026
View source
Our average revenue for the top twenty customers during the trailing twelve months ended June 30, 2026 was $124 million, which grew 67% from an average of $75 million in revenue from the top twenty customers during the trailing twelve months ended June 30, 2025, demonstrating our expanding relationships with existing customers.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Aug 4, 2026
Customers (trailing twelve months)
1,049 customers
As of Jun 30, 2026
View source
During the period ended June 30, 2026 and 2025, we had 1,049 and 849 customers, respectively, including companies in various commercial sectors and government agencies around the world.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Aug 4, 2026

The statements, as filed

The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.

Income statement19 lines, as presented in the 10-Q
LineQ2 FY2026A year earlierChangeOf revenueSource
Income Statement
Revenue$1.94B$1.00B+93%100%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-08-04
Cost of revenue$296.9M$192.9M+54%15.3%Source10-Q, us-gaap:CostOfRevenue, as reported in the 10-Q filed 2026-08-04
Gross profit$1.64B$810.8M+102%84.7%Source10-Q, us-gaap:GrossProfit, as reported in the 10-Q filed 2026-08-04
Operating expenses:
Sales and marketing$339.5M$243.8M+39%17.5%Source10-Q, us-gaap:SellingAndMarketingExpense, as reported in the 10-Q filed 2026-08-04
Research and development$192.5M$135.0M+43%9.9%Source10-Q, us-gaap:ResearchAndDevelopmentExpense, as reported in the 10-Q filed 2026-08-04
General and administrative$194.6M$162.6M+20%10.1%Source10-Q, us-gaap:GeneralAndAdministrativeExpense, as reported in the 10-Q filed 2026-08-04
Total operating expenses$726.6M$541.4M+34%37.5%Source10-Q, us-gaap:OperatingExpenses, as reported in the 10-Q filed 2026-08-04
Income Statement
Income from operations$912.0M$269.3M+239%47.1%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-08-04
Interest income$77.5M$56.3M+38%4.0%Source10-Q, us-gaap:InvestmentIncomeInterest, as reported in the 10-Q filed 2026-08-04
Other income (expense), net$91.8M$6.6M+1,292%4.7%Source10-Q, us-gaap:OtherNonoperatingIncomeExpense, as reported in the 10-Q filed 2026-08-04
Income before provision for income taxes$1.08B$332.2M+226%55.9%Source10-Q, us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest, as reported in the 10-Q filed 2026-08-04
Provision for income taxes$15.4M$3.6M+328%0.8%Source10-Q, us-gaap:IncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-08-04
Net income$1.07B$328.6M+224%55.1%Source10-Q, us-gaap:ProfitLoss, as reported in the 10-Q filed 2026-08-04
Less: Net income attributable to noncontrolling interests$4.1M$1.8M+121%0.2%Source10-Q, us-gaap:NetIncomeLossAttributableToNoncontrollingInterest, as reported in the 10-Q filed 2026-08-04
Net income attributable to common stockholders$1.06B$326.7M+225%54.9%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-08-04
Earnings per share attributable to common stockholders, basic$0$0+214%0.0%Source10-Q, us-gaap:EarningsPerShareBasic, as reported in the 10-Q filed 2026-08-04
Earnings per share attributable to common stockholders, diluted$0$0+215%0.0%Source10-Q, us-gaap:EarningsPerShareDiluted, as reported in the 10-Q filed 2026-08-04
Weighted-average shares of common stock outstanding used in computing earnings per share attributable to common stockholders, basic2,399,820,0002,365,196,000+1.5%Source10-Q, us-gaap:WeightedAverageNumberOfSharesOutstandingBasic, as reported in the 10-Q filed 2026-08-04
Weighted-average shares of common stock outstanding used in computing earnings per share attributable to common stockholders, diluted2,568,694,0002,562,912,000+0.2%Source10-Q, us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding, as reported in the 10-Q filed 2026-08-04
Cash flow statement2 lines, as presented in the 10-Q

Year to date, as a quarterly filing reports it.

LineQ2 FY2026A year earlierChangeSource
Operating activities
Net income$1.07B$328.6M+224%Source10-Q, us-gaap:ProfitLoss, as reported in the 10-Q filed 2026-08-04
Statement of Cash Flows
Cash, cash equivalents, and restricted cash - end of period$2.06B$951.2M+117%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-08-04
Balance sheet26 lines, as presented in the 10-Q
LineQ2 FY2026A year earlierChangeSource
Current assets:
Cash and cash equivalents$2.03B$929.5M+118%Source10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-08-04
Marketable securities$7.38BSource10-Q, us-gaap:MarketableSecuritiesCurrent, as reported in the 10-Q filed 2026-08-04
Accounts receivable, net$1.49BSource10-Q, us-gaap:AccountsReceivableNetCurrent, as reported in the 10-Q filed 2026-08-04
Prepaid expenses and other current assets$205.2MSource10-Q, us-gaap:PrepaidExpenseAndOtherAssetsCurrent, as reported in the 10-Q filed 2026-08-04
Total current assets$11.10BSource10-Q, us-gaap:AssetsCurrent, as reported in the 10-Q filed 2026-08-04
Assets
Property and equipment, net$61.4MSource10-Q, us-gaap:PropertyPlantAndEquipmentNet, as reported in the 10-Q filed 2026-08-04
Operating lease right-of-use assets$230.3MSource10-Q, us-gaap:OperatingLeaseRightOfUseAsset, as reported in the 10-Q filed 2026-08-04
Other assets$287.4MSource10-Q, us-gaap:OtherAssetsNoncurrent, as reported in the 10-Q filed 2026-08-04
Total assets$11.68BSource10-Q, us-gaap:Assets, as reported in the 10-Q filed 2026-08-04
Current liabilities:
Accounts payable, accrued liabilities, and other$504.1MSource10-Q, us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent, as reported in the 10-Q filed 2026-08-04
Deferred revenue$579.4MSource10-Q, us-gaap:DeferredRevenueCurrent, as reported in the 10-Q filed 2026-08-04
Customer deposits$452.1MSource10-Q, pltr:CustomerDepositCurrent, as reported in the 10-Q filed 2026-08-04
Total current liabilities$1.54BSource10-Q, us-gaap:LiabilitiesCurrent, as reported in the 10-Q filed 2026-08-04
Liabilities and Equity
Deferred revenue, noncurrent$33.7MSource10-Q, us-gaap:DeferredRevenueNoncurrent, as reported in the 10-Q filed 2026-08-04
Customer deposits, noncurrent$537.0KSource10-Q, pltr:CustomerDepositNoncurrent, as reported in the 10-Q filed 2026-08-04
Operating lease liabilities, noncurrent$211.4MSource10-Q, us-gaap:OperatingLeaseLiabilityNoncurrent, as reported in the 10-Q filed 2026-08-04
Other noncurrent liabilities$12.4MSource10-Q, us-gaap:OtherLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-08-04
Total liabilities$1.79BSource10-Q, us-gaap:Liabilities, as reported in the 10-Q filed 2026-08-04
Palantir's stockholders’ equity:
Common stock, $0.001 par value$2.4MSource10-Q, us-gaap:CommonStockValue, as reported in the 10-Q filed 2026-08-04
Additional paid-in capital$11.41BSource10-Q, us-gaap:AdditionalPaidInCapital, as reported in the 10-Q filed 2026-08-04
Accumulated other comprehensive income (loss), net-$7.1MSource10-Q, us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax, as reported in the 10-Q filed 2026-08-04
Accumulated deficit-$1.63BSource10-Q, us-gaap:RetainedEarningsAccumulatedDeficit, as reported in the 10-Q filed 2026-08-04
Total Palantir's stockholders’ equity$9.77BSource10-Q, us-gaap:StockholdersEquity, as reported in the 10-Q filed 2026-08-04
Noncontrolling interests$110.7MSource10-Q, us-gaap:MinorityInterest, as reported in the 10-Q filed 2026-08-04
Total equity$9.88B$6.03B+64%Source10-Q, us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest, as reported in the 10-Q filed 2026-08-04
Liabilities and Equity
Total liabilities and equity$11.68BSource10-Q, us-gaap:LiabilitiesAndStockholdersEquity, as reported in the 10-Q filed 2026-08-04

About this data

Source
Palantir 10-Q, accession 0001321655-26-000041, filed Aug 4, 2026, read on Nov 2, 2026.
History
From the SEC's XBRL company facts, the value from the latest filing that stated each period.
Reading
Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
Version
methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
Edge and risks

What holds Palantir's model up, and what could bend it

Competitive edge

  • Existing accounts, not new ones, carry the growth

    Average top-twenty customer revenue rose to $124M from $75M while customers rose to 1,049 from 849, so depth outpaced breadth.

    The detail

    The filing attributes most of the quarter's revenue increase in both segments to customers that already existed at the end of the previous year, and says increases from existing customers are related to wider adoption of its products within their organizations. Average revenue from the top twenty customers over the trailing twelve months reached $124M, from $75M a year earlier.1

    AnalysisThis is why the advantage holds. Once a customer's data, logic and actions are mapped into the Ontology, each new workflow reuses that mapping, so the next team costs less to serve than the first. Leaving would mean rebuilding that mapping elsewhere, which raises the practical cost of switching even where contracts allow it.

  • High gross margin on almost no capital

    Gross margin was 84.66% and capital spending only 0.75% of revenue, as the platforms run on rented cloud and are configured, not rebuilt.

    The detail

    Gross margin rose 3.88 points to 84.66% as cost of revenue grew 53.9% against revenue's 92.8%. Capital expenditure was $14.6M for the quarter, against $1.94B of revenue. Research and development of $192.5M was 9.95% of revenue. The company runs its hosted platforms on third-party cloud services rather than on infrastructure of its own.1

    AnalysisOne shared product serves every customer, so engineering spending is paid once and spread across all accounts, while the per-customer work is configuration and training. Little money has to be tied up in equipment ahead of demand. The trade-off is reliance on cloud vendors, covered in the risks.

  • Government anchors revenue while commercial sets the pace

    Government still supplies 51.15% of revenue, but commercial grew 109.8% against government's 79.0%, lifting its share by 3.94 points to 48.85%.

    The detail

    Government revenue was $990.0M and commercial revenue $945.4M, so commercial was 95.5% of the government total. The filing calls government customers a meaningful source of revenue, particularly during periods of economic uncertainty, and attributes growth in both segments mainly to existing customers.1

    AnalysisThe same platforms sell to both markets. Demanding defense and intelligence work builds the credibility that helps a commercial sale, and commercial scale funds the product that governments use. Two customer types with different budget cycles also spread the timing of demand, though the filing notes both follow seasonal patterns.

What to watch

  • Cloud hosting costs pulled gross margin down from last quarter

    Cost of revenue rose to $296.9M from $215.8M in the prior quarter, so gross margin slipped to 84.66% even as revenue grew.

    The detail

    Against the first quarter, revenue rose to $1.94B from $1.63B while cost of revenue rose to $296.9M from $215.8M, taking cost to 15.34% of revenue from 13.22%. Year on year, gross margin still rose 3.88 points. The filing attributes the year-on-year cost increase primarily to third-party cloud hosting services, partly offset by lower subcontractor expenses.1

    In the first half the company amended a third-party cloud agreement, committing to minimum annual spending over a contract that runs into the next decade. Its risk factors name dependence on third-party computing infrastructure, which may suffer errors, disruption, performance problems or failure.1

    AnalysisAI workloads consume compute that is paid for as it is used. For gross margin to hold, that usage has to be priced to cover its cost and the committed capacity has to be used. One quarter is not a trend, but the quarter-on-quarter move is where a mismatch would first show.

  • Many contracts can be ended for convenience

    Revenue is recognized over multi-year terms, yet many contracts allow termination on notice, and government work, 51.15% of revenue, depends on budgets.

    The detail

    The filing says many customer contracts contain termination for convenience provisions, customers have no obligation to renew, and the U.S. federal government cannot exercise contract options more than one year in advance. It says the company has historically not realized the full deal value of its contracts, and that some customers have reduced spending or required refunds.1

    Government revenue of $990.0M, 51.15% of the total, is exposed to budgets, spending priorities, delays in appropriations and procurement policy. The company also lists reputational risk from its government and sensitive-industry work, including activist protests and investor concerns, which it says could affect contract awards and renewals.1

  • The leverage that lifted margin also works in reverse

    Expenses are largely fixed in the short term, so if revenue growth slowed, the margin gained at 92.8% growth would not hold automatically.

    The detail

    The filing says a substantial portion of expenses is relatively fixed in the short term, that a large portion of sales closes in the last weeks of a quarter, and that revenue growth may not be sustained. It expects operating expenses to keep rising and lists the timing of stock-based compensation and related employer payroll taxes among causes of quarterly swings.1

    The history shows how fast quarterly profit can move. Operating income fell to $11.0M in Q4 FY2024 from $113.1M in the prior quarter, even as revenue rose to $827.5M from $725.5M. The Q4 FY2024 figure is derived from the annual total less the first nine months, and this filing does not discuss that quarter.1

    AnalysisMargin expansion of this kind depends on revenue continuing to outrun headcount and equity grants. A slowdown in adoption inside existing accounts would show first as operating expenses growing closer to revenue's pace.

Sources

  1. 1.Palantir 10-Q for the period to 2026-06-30 (the filing), Aug 4, 2026, read Nov 2, 2026
Go deeper

Palantir, further in

Member research, then your own questions on ChatGPT.

What could change the outlook

What Palantir's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.

  • What the 47.1% operating margin depends on from here

    Which costs are fixed, which rise with usage, and how cloud commitments and equity pay would bear on the margin if adoption inside existing accounts slowed.

  • How much of the profit is the software business?

    Separating investment gains, interest income and a low tax charge from operating profit, and what a release of the tax valuation allowance would change in reported earnings.

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Questions to start with
  • If Palantir's revenue growth slowed toward the pace of its operating expenses, what would happen to its operating margin?
  • How much of Palantir's latest net income came from investment gains and a low tax charge rather than its software business?
  • Why has Palantir's free cash flow run ahead of its operating income, and what could reverse that?

Business Lens describes Palantir from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.