Palantir's Q3 2025 Earnings Call: Contradictions in Sales Strategy, AI Empowerment, and Customer Demand

Date of Call: None provided

Financials Results

• Revenue: $1.181B, up 63% YOY and 18% sequentially
• EPS: $0.18 GAAP EPS; $0.21 adjusted EPS
• Gross Margin: 84% adjusted gross margin (excludes stock-based compensation)
• Operating Margin: 51% adjusted operating margin (highest-ever); 33% GAAP operating margin

Guidance:

• Q4 revenue $1.327B–$1.331B; Q4 adjusted income from operations $695M–$699M.
• FY2025 revenue $4.396B–$4.400B (midpoint $4.398B), ~53% YOY.
• FY U.S. commercial revenue > $1.433B (at least 104% YOY).
• FY adjusted income from operations $2.151B–$2.155B; adjusted free cash flow $1.9B–$2.1B.
• Expect GAAP operating income and net income in each quarter; FY Rule of 40 guide ~102%.

Business Commentary:

• Revenue Growth and Market leadership:
• Palantir reported a record revenue of $1.181 billion for Q3 2025, up 63% year-on-year and 18% sequentially.

• The growth was driven by strong execution in the U.S. market, which accounted for three-quarters of the business, and the U.S. commercial business that grew 121% year-on-year, along with the demand for AI production use cases.

• U.S. Government Business and Growth:

• Palantir's U.S. government revenue grew 52% year-over-year and 14% sequentially, reflecting the growing demand for AI in government software offerings.

• This growth was driven by continued execution in existing programs and new awards, with a significant contribution from the U.S. Army's directive to consolidate its data platform.

• Commercial Segment Expansion:

• The company's commercial revenue grew 73% year-over-year and 22% sequentially, marking the fourth consecutive quarter with larger commercial business revenue than the U.S. government business.

• This expansion was driven by AIP's role in compounding AI leverage and providing enterprise-wide solution capabilities, as seen in major customer transformations in industries like medical devices and insurance.

• Product Innovation and AI Capabilities:

• Palantir's progress in AI applications within AIP, highlighted by AIFDE and AI HiveMind, demonstrated significant advancements in customer productivity and problem-solving capabilities.
• These innovations have enabled rapid solution development and integrated enterprise ontologies, enhancing customer deployments and market differentiation.

Sentiment Analysis:

Overall Tone: Positive

• Management: "revenue grew 63% year-over-year and 18% sequentially to $1.181 billion"; "Rule of 40 score soared to 114"; "highest-ever reported adjusted operating margin of 51%"; "closed our highest TCV quarter ever at $2.8 billion." These statements and record metrics underscore an emphatically positive tone.

Q&A:

• Question from Dan Ives (Wedbush): For Alex and team, can you just walk through the accelerated sales cycles that you are seeing from so many companies that have gone to the boot camps? What surprised you from when they come to you at that first sort of contact to now actually launching deals?
  Response: Customers now pursue rapid, C-suite-led enterprise-wide AI transformations, shortening sales cycles and expanding deal size — evidenced by $1.3B in U.S. commercial TCV and a ~6x dollar-weighted duration increase.

• Question from Mariana (Bank of America): On commercial, can you discuss what changed from a behavioral perspective for customers to accelerate adoption and expansions, and internally how are you using tech like AIFDE to scale? On government, how do you view opportunities like Golden Dawn going forward?
  Response: Observable customer ROI and network effects are driving broader, faster AIP adoption; internally Palantir scales by boosting FDE productivity with AIFDE to accelerate deployments; government opportunity pipeline is substantial though specifics were not disclosed.

Contradiction Point 1

Sales Strategy and Growth

It directly impacts expectations regarding the company's growth strategy and sales approach, which can influence investor decisions and market confidence.

Can you discuss the accelerated sales cycles among boot camp participants? What surprised you during deal launches? - Dan with Wedbush

2025Q3: Palantir's growth strategy is driven by customer referrals and testimonials, rather than a direct sales force. The focus is on delivering value that speaks for itself, allowing customers to become our sales force. This approach has led to increased credibility and faster adoption, with customers seeking Palantir's expertise to replicate results, leading to accelerated growth. - Alexander C. Karp(CEO)

How is Palantir managing growth without a direct sales force? - Daniel Harlan Ives (Wedbush Securities Inc., Research Division)

2025Q2: We're seeing a significant shift in customer behavior, with C-suite leaders across the company approaching us to deploy Palantir and AIP across their entire organization. There's a growing realization that Palantir delivers transformational impact, prompting clients to approach us with the expectation of reorganizing their enterprise around our product. - Ryan Taylor(CRO, CLO)

Contradiction Point 2

AI Enablement and Worker Empowerment

It reflects inconsistencies in the company's approach to AI enablement and worker empowerment, which could impact product development and market positioning.

What behavioral changes have led to the accelerated adoption of Palantir, and how has Palantir implemented technology to address this demand? - Mariana with Bank of America

2025Q3: AI is giving American workers superpowers, enhancing productivity and efficiency in various industries. At Palantir, we're focusing on empowering workers, especially those in blue-collar jobs, through AI applications that increase their capabilities and allow them to manage complex tasks more effectively. Our American Tech Fellowship aims to train and credential these workers, further expanding AI's reach and impact. - Shyam Sankar(CTO, Exec VP)

How is Palantir making AI more accessible to frontline workers and decision-makers beyond LLMs? - Christina (Shareholder)

2025Q2: We're seeing a significant shift in customer behavior, with C-suite leaders across the company approaching us to deploy Palantir and AIP across their entire organization. There's a growing realization that Palantir delivers transformational impact, prompting clients to approach us with the expectation of reorganizing their enterprise around our product. - Ryan Taylor(CRO, CLO)

Contradiction Point 3

Customer Behavior and Demand Shift

It involves differing perspectives on customer behavior and demand, which are crucial for strategic planning and market positioning.

Can you discuss the accelerated sales cycles among boot camp participants? What surprised you during the transition from initial contact to deal launches? - Dan with Wedbush

2025Q3: We're seeing a significant shift in customer behavior, with C-suite leaders across the company approaching us to deploy Palantir and AIP across their entire organization. - Ryan Taylor(CRO & CLO)

Does Palantir have an opportunity to gain a larger budget share in the U.S. government given the emphasis on meritocracy and efficiency? - Dan Ives (Wedbush)

2025Q1: We predict we'll do very well, but there will be lumpiness. Where there's pressure testing and meritocracy, expect Palantir to excel with our software. - Alex Karp(CEO)

Contradiction Point 4

AI Innovation and Integration

It highlights differing views on the integration of AI technology and its impact on Palantir's competitive advantage, which is crucial for strategic decision-making and market positioning.

What factors drove the increased adoption of Palantir, and how has the company scaled its technology to meet this demand? - Mariana with Bank of America

2025Q3: We've leveraged AI FDEs to improve productivity, allowing us to manage growth without proportional headcount increase. - Ryan Taylor(CRO & CLO)

How will Palantir sustain its competitive advantage in AI amid growing competition? - Gabriel (Shareholder)

2025Q1: Our advantage comes down to ontology. Ontology positions AIP as the platform that captures the ever-expanding capability of raw LLMs and turns that into business value. - Shyam Sankar(CTO)

Contradiction Point 5

European Defense and Warp Speed

It involves Palantir's strategic approach to European defense initiatives and the application of its Warp Speed technology, which could influence international partnerships and revenue opportunities.

How do you view opportunities like Golden Dawn moving forward? - Mariana with Bank of America

2025Q3: We are deeply involved in supporting the U.S. government and international allies, contributing to critical missions worldwide. Our efforts include defending America, Ukraine, and supporting ICE. - Alex Karp(CEO)

Are you considering applying Warp Speed to Europe's defense buildup, and where else could software add value in sectors such as Golden Dome or space communications? - Mariana Perez Mora (Bank of America)

2025Q1: Shyam Sankar: We'd love to help Europe with manufacturing challenges. Warp Speed's precondition is recognizing the existing manufacturing stack is broken. Some European companies are showing interest, but we need customers to understand the necessity. Alex Karp: Europe doesn't yet grasp AI fully, but it will. - Shyam Sankar(CTO) and Alex Karp(CEO)