Fearpassage

$PLTR Palantir, once again, puts up one of the best quarters that the market has ever seen. Being able to grow revenues 96% while having 62% adjusted operating income margins is unheard of. There is no other software company that is even close to putting up these types of results. US commercial revenue officially passed US government revenue for the first time. I remember in 2022, the bear case was centered around the company being too reliant on the USG. If anything, that was the bull case because that gave them the time to figure out how to scale US commercial and now we have a company doing 29% growth QoQ, which would be amazing YoY for most companies as Dr. Karp said, but also scaling that YoY growth at 148% for US commercial. It is unprecedented. So, why? Why is it happening? Well, it seems like Sovereignty is a very, very big deal. “The Sovereign AI movement is imposing the most dramatic dichotomy between haves and have nots that I have witnessed in 30 years of business. Every institution—government and commercial—is rapidly being forced, voluntarily or not, into one of these two categories,” said Alex Karp. Having been to multiple AIPCons and Institutional Sovereignty bootcamps this year, I can say that this is very real. When you talk to customers, you realize that they want much, much more than just plugging their enterprise into an LLM. They actually want FDEs, they want the grunt work of figuring out how to build custom workflows, they want the post training and fine tuning of open models...they want outcomes. The reason Palantir is growing this fast and continuing to show so much operating leverage is because they are delivering outcomes. That's why this is working. The company is doing this with 1090 customers. Most enterprise software companies at this scale have well over 100K customers. I mean, once again, this is unprecedented. Their net dollar retention scaled to 165%...their rule of 40 is now a new record at 158%...these are numbers that you only get when the company's entire mission is geared towards making sure their partners succeed and as a result, they are being paid for that value and then monetizing that value at the highest efficiency any software company ever has before with these margins. Stock is down due to macro, midterms, etc. but the core business is growing faster than anything we have ever seen and doing so in one of the most profitable ways ever. Their adjusted FCF in 90 days is now equal to the revenue they were bringing in early last year. An incredible quarter by Palantir, congrats to all shareholders and a deep thank you to the executive team and employees.