Data-mining and analytics company Palantir (NYSE:PLTR) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 39.3% year on year to $883.9 million. The company expects next quarter’s revenue to be around $936 million, close to analysts’ estimates. Its non-GAAP profit of $0.13 per share was in line with analysts’ consensus estimates.
Revenue: $883.9 million vs analyst estimates of $862.3 million (39.3% year-on-year growth, 2.5% beat)
Adjusted EPS: $0.13 vs analyst estimates of $0.13 (in line)
Adjusted Operating Income: $390.7 million vs analyst estimates of $361.1 million (44.2% margin, 8.2% beat)
The company lifted its revenue guidance for the full year to $3.9 billion at the midpoint from $3.75 billion, a 3.9% increase
Operating Margin: 19.9%, up from 12.8% in the same quarter last year
Free Cash Flow Margin: 41.9%, down from 62.5% in the previous quarter
Billings: $939.3 million at quarter end, up 52.2% year on year
Market Capitalization: $292.1 billion
StockStory’s Take
Palantir’s first quarter performance was primarily driven by rapid expansion in its U.S. commercial and government segments, as detailed by management on the earnings call. Chief Revenue Officer Ryan Taylor credited continued demand for Palantir’s Artificial Intelligence Platform (AIP) in both enterprise and defense settings, noting that U.S. commercial revenue grew 71% year-over-year and U.S. government revenue rose 45%. Management highlighted the impact of larger and faster deal cycles, particularly in healthcare and financial services, and cited customer adoption stories from Walgreens and AIG as evidence of this momentum.
Looking ahead, management lifted its full-year revenue guidance and framed the company’s outlook around sustained U.S. demand and ongoing AI adoption. CEO Alex Karp pointed to increased budget scrutiny and efficiency requirements within the U.S. government as potential sources of new opportunities, stating, "Palantir does exceptionally well when things are pentested. We like pressure on the system." However, management also acknowledged continued headwinds in international markets, particularly Europe, and reiterated its focus on scaling within the U.S. and allied nations.
Key Insights from Management’s Remarks
Palantir’s leadership emphasized that first quarter results were supported by accelerating U.S. business momentum, strong customer expansion, and the growing adoption of AI-driven enterprise automation. The following key themes emerged from management’s remarks:
U.S. Commercial Acceleration: Management attributed the rapid growth in U.S. commercial revenue to demand for its AIP solution, with notable traction in healthcare and financial services. Chief Technology Officer Shyam Sankar described how Palantir’s AI agents are enabling enterprise autonomy, allowing customers to automate complex workflows and realize productivity gains.
Government Segment Expansion: The company highlighted expanding partnerships with U.S. defense agencies and new wins such as Maven Smart System deployments for the Department of Defense and NATO. Management characterized these projects as evidence that Palantir’s software is increasingly used for mission-critical applications, including intelligence analysis and command operations.
Enterprise AI Adoption Stories: Several customer case studies were cited to illustrate the speed and impact of AIP adoption. For example, Walgreens used Palantir’s software to automate decision-making across 4,000 stores, and AIG leveraged AI-driven underwriting agents to improve efficiency. Management argued these examples demonstrated measurable business value.
International Headwinds: While the company cited early signs of growth in Asia and the Middle East, executives acknowledged ongoing challenges in Europe. CEO Alex Karp stated, “Europe doesn't get AI yet... it could take a couple of years for Europe to understand that you just can't spend money. You're going to have to spend it on things that actually work.”
Product-Led Differentiation: Management stressed that Palantir’s competitive edge stems from its focus on ontology—a data modeling framework unique to its software—which it claims enables faster and more effective deployment of AI and automation at scale. CTO Sankar positioned this as a key differentiator versus other enterprise AI offerings.
Drivers of Future Performance
Management’s outlook for the next several quarters is built on continued strength in the U.S. market, expanded adoption of enterprise AI, and an increased focus on product-driven differentiation, while acknowledging international uncertainty and elevated investment needs.
U.S. AI Demand Remains Central: Management expects ongoing demand for AI-driven automation from both commercial and government customers in the U.S., citing increased urgency around efficiency and digital transformation as structural growth drivers.
International Uncertainty Lingers: Executives noted that while there are "green shoots" in Asia and the Middle East, persistent challenges in Europe—ranging from slower AI adoption to structural industry inertia—are likely to weigh on growth outside the U.S.
Rising Investment in Talent and R&D: The company plans to increase spending on technical hiring and product development, especially for AIP and related AI capabilities. Management believes these investments are necessary for sustaining long-term competitive advantages, though they may impact expense growth in the near term.
Top Analyst Questions
Dan Ives (Wedbush): Asked whether increased budget pressure in U.S. government agencies could actually help Palantir win more share, given its focus on measurable outcomes. CEO Alex Karp responded that Palantir tends to perform well in environments where performance is scrutinized and meritocracy is prioritized, stating, “where you have pressure testing, you can assume AIP... and the Palantir culture itself” will be favored.
Mariana Perez Mora (Bank of America): Inquired about Palantir’s opportunities to support European defense and whether the company will provide more software-led solutions as European countries modernize. CTO Shyam Sankar and CEO Alex Karp replied that they are ready to help, but adoption depends on local recognition of software’s central role, which remains limited in Europe.
Gabriel (Shareholder): Asked how Palantir will sustain its AI advantage amid growing competition. CTO Shyam Sankar said the company’s ontology-driven approach to AI demand—rather than just supplying AI models—remains its core differentiator, enabling faster business value creation for customers.
Ana Soro (Palantir): Queried about the impact of U.S. government budget cuts on contracts. CTO Sankar and CEO Karp argued that fiscal pressure benefits Palantir, as agencies are forced to choose solutions that deliver proven outcomes, which aligns with Palantir’s value proposition.
Mariana Perez Mora (Bank of America): Sought further clarification on Palantir’s approach to integrating software-led solutions into hardware-dependent fields, such as defense vehicles. CTO Sankar described an emerging trend where hardware is designed around software, rather than the other way around, which could open new opportunities for Palantir’s platforms.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will monitor (1) whether Palantir can sustain its rapid U.S. commercial and government growth as AI adoption deepens, (2) progress in overcoming international challenges, particularly in Europe, and (3) the pace of new product launches or enhancements that further differentiate AIP and related offerings. The ability to execute on hiring and R&D investments without margin erosion will also be a key marker of success.
Palantir currently trades at a forward price-to-sales ratio of 76.7×. At this valuation, is it a buy or sell post earnings? Find out in our free research report.
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