Why did Palantir correctly foresee the importance of 'sovereign AI' and data ownership from the beginning, while other software companies did not, leading to current strong results?

Shyam Sankar explained that the market first focused on AI efficacy, then efficiency. It took time for enterprises to realize that some partners were building competitive products and that controlling weights and metadata was crucial. Alex Karp added that Palantir's success stems from its full alignment with partners, its 'colony of artists' culture valuing early insights, and its 'outsider' status, which compels it to deliver superior results, unlike companies following a 'parasitic' software playbook. “There's also the question implicit in your question is why did we get this right? And again, I think it's -- we are actually fully aligned with our partners.”

Does Palantir's approach protect customers from being locked into a single lab's model, allowing them to switch models if one fails or is pulled, unlike other solutions?

Alex Karp confirmed that Palantir's product allows customers to switch out models, citing its use in the U.S. government, and emphasized that the company opposes monopoly capitalism that locks customers in. Ryan Taylor stated their focus is on converting tokens to value by bringing the right models to bear. Shyam Sankar added that customer-specific benchmarks naturally lead to leveraging open models and sovereignty, allowing continuous optimization and model switching. “No. I mean I'll let Ryan and Shyam comment here, but we're already doing that across the USG, U.S. government. We have a product that allows you to switch out models.”

PLTR

Palantir (PLTR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 3, 2026

Source: earnings call transcript

Executive summary

Palantir Q2 FY26 — Unprecedented U.S. Commercial Growth and Sovereign AI Momentum

Palantir delivered unprecedented Q2 FY26 results, driven by exceptional growth in its U.S. commercial and government segments, fueled by accelerating demand for its sovereign AI platform. The company emphasized its unique approach to AI, focusing on customer control over data and models, contrasting with "token maxing" models. Management expressed strong confidence in continued high growth rates, particularly in the U.S. market, while maintaining GAAP profitability and strong free cash flow.

Highlights

Total revenue grew 93% year-over-year to $1.935 billion, marking the highest ever reported growth rate.
U.S. commercial revenue accelerated to 149% year-over-year and 28% sequentially, reaching $764 million.
U.S. government revenue grew a remarkable 90% year-over-year to $809 million.
Adjusted free cash flow reached $1.22 billion, representing a 63% margin and 115% growth year-over-year.
The Rule of 40 score expanded to 155%, a 10-point increase from the prior quarter and the 12th consecutive quarter of expansion.

Concerns

Adjusted gross margin was 86%, reflecting an increase in costs associated with taking on cloud hosting for a government customer.
A significant ramp in expense is expected in Q3 due to the seasonality of new hire starts and other product and marketing initiatives.

Guidance & targets

Category	Target	Timeline	Confidence
Q3 2026 Revenue	$2.16 billion to $2.164 billion high materiality	Q3 · FY26	High
Q3 2026 Adjusted Income from Operations	$1.292 billion and $1.296 billion medium materiality	Q3 · FY26	High
Full Year 2026 Revenue	$8.15 billion and $8.158 billion high materiality	FY26	High
Full Year 2026 U.S. Commercial Revenue	in excess of $3.424 billion high materiality	FY26	High
Full Year 2026 Adjusted Income from Operations	$4.889 billion and $4.897 billion high materiality	FY26	High
Full Year 2026 Adjusted Free Cash Flow	$4.5 billion and $4.7 billion high materiality	FY26	High
Full Year 2026 GAAP Operating Income and Net Income	expected in each quarter medium materiality	FY26	High
U.S. Commercial Growth Rate	equal or above 149% high materiality	next 18 months	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Total Company Highest ever reported year-over-year revenue growth rate.	$1.935B	93%	19%	—
U.S. Business Comprises over 81% of total revenue. % of total revenue: 81%	$1.573B	115%	23%	—
U.S. Commercial Accelerated growth in the U.S. market.	$764M	149%	28%	—
U.S. Government Extraordinary strength and momentum across both defense and civil.	$809M	90%	18%	—
Commercial Segment AI platform continues to dominate the U.S. market.	$945M	110%	22%	—
International Commercial	$182M	26%	2%	—
Government Segment	$990M	79%	15%	—
International Government	$181M	42%	5%	—

PLTR operating KPIs by quarter

PLTR operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Mar 2025 Q1 FY25	Jun 2025 Q2 FY25	Sep 2025 Q3 FY25	Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change vs prior quarter
Total contract value booked	—	$1.5B First quarter TCV booked was $1.5 billion, up 66% year-over-year. Source: earnings call transcript	$2.3B We booked our highest TCV and ACV ever last quarter with $2.3 billion in TCV and $684 million in ACV. Source: earnings call transcript	$2.8B We closed our highest TCV quarter ever at $2.8 billion. Source: earnings call transcript	$4.3B We closed our highest TCV quarter ever at $4.3 billion, and fourth quarter trailing 12-month revenue from our top 20 customers increased 45% year-over-year to $94 million per customer, a testament to our customers' conviction. Source: earnings call transcript	$2.4B We closed $2.4 billion of TCV bookings, up 61% year-over-year. Source: earnings call transcript	$3.4B We closed $3.4 billion of TCV bookings, up 49% year-over-year. Source: earnings call transcript	+41.7%
Customers	711 Customer count grew 43% year-over-year and 13% sequentially to 711 customers. Source: earnings call transcript	769 Customer count grew 39% year-over-year and 8% sequentially to 769 customers. Source: earnings call transcript	849 Customer count grew 43% year-over-year and 10% sequentially to 849 customers. Source: earnings call transcript	911 Customer count grew 45% year-over-year and 7% sequentially to 911 customers. Source: earnings call transcript	954 Customer count grew 34% year-over-year and 5% sequentially to 954 customers. Source: earnings call transcript	1,007 Customer count grew 31% year-over-year and 6% sequentially to 1,007 customers. Source: earnings call transcript	—	+5.6%
Total contract value booked Commercial	$995M We had the strongest quarter of commercial TCV booked at $995 million, representing 42% growth year-over-year and 63% growth sequentially. Source: earnings call transcript	$930M We closed $930 million in commercial TCV bookings, representing 84% growth year-over-year. Source: earnings call transcript	$1.1B We closed $1.1 billion in commercial TCV bookings, representing 185% growth year-over-year. Source: earnings call transcript	$1.4B We closed $1.4 billion in commercial TCV bookings representing 132% growth year-over-year and 32% sequentially. Source: earnings call transcript	$2.6B We closed $2.6 billion in commercial TCV bookings in the fourth quarter, representing 161% growth year-over-year and 83% sequentially. Source: earnings call transcript	$1.3B We closed $1.3 billion in commercial TCV bookings in the first quarter, representing 42% growth year-over-year. Source: earnings call transcript	$2.337B We closed $2.337 billion in commercial TCV bookings in the second quarter, representing 118% growth year-over-year. Source: earnings call transcript	+79.8%
Total contract value booked US Commercial	$803M We also had our strongest quarter of US commercial TCV booked at $803 million, representing growth of 134% year-over-year and 170% sequentially. Source: earnings call transcript	$810M We closed $810 million in US commercial TCV with a 239% year-over-year growth rate on a dollar-weighted duration basis, and we closed twice as many deals of $1 million or more compared to the same time period a year ago. Source: earnings call transcript	$843M We had our strongest quarter of US commercial TCV booked at $843 million, representing growth of 222% year-over-year. Source: earnings call transcript	$1.3B We closed $1.3 billion in TCV, a milestone achievement for the fastest-growing area of our business with a more than 6x year-over-year growth rate on a dollar-weighted duration basis. Source: earnings call transcript	$1.3B In the fourth quarter, we closed $1.3 billion of US commercial TCV bookings, representing growth of 67% year-over-year. Source: earnings call transcript	$1.2B In Q1, we closed our third consecutive quarter of over $1 billion in US commercial TCV bookings at $1.2 billion, representing growth of 45% year-over-year. Source: earnings call transcript	$2.132B We closed $2.132 billion of US commercial TCV bookings, representing growth of 153% year-over-year and 81% sequentially, nearly $800 million above our prior highest US commercial bookings quarter. Source: earnings call transcript	+77.7%
Customers US Commercial	382 Our US commercial customer count grew to 382 customers, growth of 73% year-over-year and 19% sequentially. Source: earnings call transcript	432 Our US commercial customer count grew to 432 customers reflecting growth of 65% year-over-year and 13% sequentially. Source: earnings call transcript	485 Our US commercial customer count grew to 485 customers, reflecting growth of 64% year-over-year and 12% sequentially. Source: earnings call transcript	530 Our US commercial customer count grew to 530 customers, reflecting growth of 65% year-over-year and 9% sequentially. Source: earnings call transcript	571 Our US commercial customer count grew to 571 customers, reflecting growth of 49% year-over-year and 8% sequentially. Source: earnings call transcript	615 Our US commercial customer count grew to 615 customers, reflecting growth of 42% year-over-year and 8% sequentially. Source: earnings call transcript	653 Our US commercial customer count grew to 653 customers, reflecting growth of 35% year-over-year and 6% sequentially. Source: earnings call transcript	+6.2%
Net revenue retention rate	120% Net dollar retention was 120%, an increase of 200 basis points from last quarter. Source: earnings call transcript	124% Net dollar retention was 124%, an increase of 400 basis points from last quarter. Source: earnings call transcript	128% Net dollar retention was 128%, an increase of 400 basis points from last quarter. Source: earnings call transcript	134% Net dollar retention was 134%, an increase of 600 basis points from last quarter. Source: earnings call transcript	139% Net dollar retention was 139%, an increase of 500 basis points from last quarter. Source: earnings call transcript	150% Net dollar retention was 150%, an increase of 1,100 basis points from last quarter. Source: earnings call transcript	157% Net dollar retention was 157%, an increase of 700 basis points from last quarter. Source: earnings call transcript	+7 pt
Total remaining deal value	$5.43B We ended the fourth quarter with $5.43 billion in total remaining deal 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. Source: earnings call transcript	$5.97B We ended the first quarter with $5.97 billion in total remaining deal value, an increase of 45% year-over-year and 10% sequentially and $1.9 billion in remaining performance obligations, an increase of 46% year-over-year and 10% sequentially. Source: earnings call transcript	$7.1B We ended the second quarter was $7.1 billion in total remaining deal value, an increase of 65% year-over-year and 20% sequentially and $2.4 billion in remaining performance obligations, an increase of 77% year-over-year and 27% sequentially. Source: earnings call transcript	$8.6B We ended the third quarter with $8.6 billion in total remaining deal value, an increase of 91% year-over-year and 21% sequentially and $2.6 billion in the remaining performance obligations, an increase of 66% year-over-year and 8% sequentially. Source: earnings call transcript	$11.2B We ended the fourth quarter with $11.2 billion in total remaining deal value, an increase of 105% year-over-year and 29% sequentially and $4.2 billion in remaining performance obligations, an increase of 144% year-over-year and 62% sequentially. Source: earnings call transcript	$11.8B We ended the first quarter with $11.8 billion in total remaining deal value, an increase of 98% year-over-year and 6% sequentially and $4.5 billion in remaining performance obligations, an increase of 134% year-over-year and 9% sequentially. Source: earnings call transcript	$13.1B We ended the second quarter with $13.1 billion in total remaining deal value, an increase of 83% year-over-year and 11% sequentially and $4.9 billion in remaining performance obligations, an increase of 103% year-over-year and 10% sequentially. Source: earnings call transcript	+11%
Remaining performance obligation (RPO)	$1.73B We ended the fourth quarter with $5.43 billion in total remaining deal 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. Source: earnings call transcript	$1.9B We ended the first quarter with $5.97 billion in total remaining deal value, an increase of 45% year-over-year and 10% sequentially and $1.9 billion in remaining performance obligations, an increase of 46% year-over-year and 10% sequentially. Source: earnings call transcript	$2.4B We ended the second quarter was $7.1 billion in total remaining deal value, an increase of 65% year-over-year and 20% sequentially and $2.4 billion in remaining performance obligations, an increase of 77% year-over-year and 27% sequentially. Source: earnings call transcript	$2.6B We ended the third quarter with $8.6 billion in total remaining deal value, an increase of 91% year-over-year and 21% sequentially and $2.6 billion in the remaining performance obligations, an increase of 66% year-over-year and 8% sequentially. Source: earnings call transcript	$4.2B We ended the fourth quarter with $11.2 billion in total remaining deal value, an increase of 105% year-over-year and 29% sequentially and $4.2 billion in remaining performance obligations, an increase of 144% year-over-year and 62% sequentially. Source: earnings call transcript	$4.5B We ended the first quarter with $11.8 billion in total remaining deal value, an increase of 98% year-over-year and 6% sequentially and $4.5 billion in remaining performance obligations, an increase of 134% year-over-year and 9% sequentially. Source: earnings call transcript	$4.9B We ended the second quarter with $13.1 billion in total remaining deal value, an increase of 83% year-over-year and 11% sequentially and $4.9 billion in remaining performance obligations, an increase of 103% year-over-year and 10% sequentially. Source: earnings call transcript	+8.9%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

U.S. commercial TCV bookings $2.132B Q2 FY26 end

153% year-over-year; 81% sequentially

Dollar-weighted duration basis.

Commercial TCV bookings $2.337B Q2 FY26 end

118% year-over-year

U.S. commercial TCV bookings (past 12 months) $5.964B Q2 FY26 end

117% increase from prior 12 months

Government TCV bookings $3.4B Q2 FY26 end

49% year-over-year

Government TCV bookings (dollar-weighted duration) 129% Q2 FY26 end

year-over-year

Total remaining deal value $13.1B Q2 FY26 end

83% year-over-year; 11% sequentially

Remaining performance obligations (RPO) $4.9B Q2 FY26 end

103% year-over-year; 10% sequentially

Primarily comprised of commercial business; does not include contracts with initial term of less than 12 months or obligations beyond termination for convenience clauses common in government business.

Total remaining deal value (U.S. commercial) 124% Q2 FY26 end

year-over-year; 27% sequentially

Product announcements

Product	Type	Timeline	Details
Maven platform	launch	this past quarter
American Builder Summit	milestone	last week

Deals & partnerships

Multinational technology company Expansion of platform use across full portfolio, converting from a pilot at one operating company. nearly $370M 3-year

Began working in Q4 last year at one operating company, expanded on success, converted to a 3-year nearly $370 million deal last quarter.

Global asset management firm Asset management automation and investment life cycle intelligence across 4 verticals. $35M TCV 3-year

Started working in Q1, then converted last quarter to a 3-year $35 million TCV deal.

Global software and services company Initial deal signed after an agent camp. $15M 5-month

Signed an initial $15 million 5-month deal last quarter after an agent camp in May.

Leading nonprofit health system Partnership converted from a pilot. $37M TCV 3-year

Signed a pilot at the end of 2025 and then last quarter converted to a 3-year partnership at $37 million TCV.

NVIDIA Partnership to expand application layer and fine-tune models.

We built a partnership with NVIDIA. We're expanding our application layer. We are going to enter the market and already entering it in the classified space, as Shyam alluded to, of fine-tuning models.

Risks & headwinds

Token maxing leading to IP migration and business commoditization Ongoing

Breaking corporate budgets without results; companies paying to give away their most important secrets, contributing to commoditization.

Mitigation:Palantir's sovereign AI approach, enabling customers to own operational definition of data, logic, actions, and security; building a stack that enables compounding of alpha.

Enterprises locked into specific frontier models Ongoing

Potential for mission-critical systems to fail if models are pulled or become suboptimal; being beholden to a lab's models.

Mitigation:Palantir's product allows customers to switch out models; focus on customer-specific benchmarking and leveraging open models to avoid vendor lock-in.

Significant ramp in Q3 expenses Q3 FY26

$741 million adjusted expense in Q2, up 14% sequentially and 37% YoY, with further ramp expected.

Mitigation:Continued investment in AI platform and technical hiring, R&D for product pipeline and sovereign AI efforts, with a commitment to sustained GAAP profitability.

What to watch in Q3 FY26

U.S. Commercial Revenue Growth Rate

next 18 months (starting Q3 FY26)

Current 149% YoY

Target Equal to or above 149% YoY

Why it matters

Alex Karp set this as a very high goal for the business, indicating management's ambition and confidence in the U.S. market's potential.

I am driving the business to grow at a rate equal or above to what we have in U.S. commercial for the next 18 months, which is a very high goal, but it is one we can actually get to because we are fully aligned with what's right and what's good and what actually works well in an enterprise.

Find out whether PLTR delivers this. Inve re-checks your case every morning.

Q&A highlights

What unexpected insights or learnings came from the recent sovereign boot camp, given the overwhelming attendance?

Alex Karp noted the massive demand for education from diverse attendees (CEOs, operational leads) on how to control their data and avoid 'token maxing.' He highlighted that even older partners, who had not engaged recently, attended, contributing to the strong Net Dollar Retention (NDR). He also mentioned the internal excitement within Palantir and the need to find technically competent partners to scale and meet the demand.

“So like when you're working in enterprise, it's really important that the operational people are interested. So it was like CEOs, operational leads. And there's a huge educational component, and Shyam talks about this a lot, likely people understand that they need a way of controlling their alpha.”

asked by Dan Ives · answered by Alexander Karp

2 min read 6 chapters

Detailed narrative

Sovereign AI and Market Shift

Palantir highlighted an "abrupt market shift in LLMs" towards AI sovereignty, where enterprises demand control over their data, logic, actions, and security. The company positions its AIP platform as the solution, contrasting it with "token maxing" models that lead to data commoditization and budget overruns without clear value.

This shift is driving customers to seek full ownership of their alpha, recognizing the dangers of transferring proprietary information to third-party models.

U.S. Business Dominance and Acceleration

The U.S. market continues to be a primary growth driver, comprising over 81% of total revenue. U.S. commercial revenue saw significant acceleration, growing 149% year-over-year and 28% sequentially to $764 million. U.S. government revenue also demonstrated strong performance with 90% year-over-year growth and 18% sequentially, reaching $809 million, driven by continued execution in existing programs and new awards.

AIP Platform and FDE Differentiator

The AIP platform is described as the "best, most ergonomic environment for AI in the enterprise," integrating mixed AI teams and delivering fast implementations. The company emphasized its unique "Forward Deployed Engineers" (FDEs) as a critical differentiator, enabling customers to turn tokens into economic value.

This was exemplified by a $10 million ACV contract win where Palantir's FDEs and AIP platform succeeded against a frontier lab's deployment team.

Benchmarking vs. Benchmaxing

Shyam Sankar introduced the concept of "benchmaking," where customers create specific benchmarks aligned with their business needs, rather than "benchmaxing" against generic frontier models. This approach allows customers to optimize for their own trade-offs in cost, performance, and latency, fostering continuous improvement.

He noted that vanilla Nemotron Ultra models, without post-training, outperformed frontier models in 5 production tasks within 24 hours when tested against customer-specific benchmarks.

Record Customer Momentum and Deal Velocity

Palantir reported record deal closures, including 220 deals worth $1 million or more, 98 deals over $5 million, and 73 deals over $10 million. U.S. commercial TCV bookings reached $2.132 billion, a 153% year-over-year increase, with customers converting pilots into multi-year, multi-million dollar contracts.

Examples included a multinational technology company converting to a 3-year, nearly $370 million deal and a global asset management firm signing a 3-year, $35 million TCV deal.

Philosophical Alignment and Outsider Status

Alex Karp articulated Palantir's philosophical alignment with partners, emphasizing building products that deliver value and rejecting "parasitic" software models. He attributed the company's success to its "colony of artists" culture, valuing early insights, and its "outsider" status which drives a need for superior results.

This alignment, he stated, is crucial for transforming the U.S. and allied countries, fostering a future where production is more efficient and manufacturing thrives.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.