Palantir Technologies Inc. Q3 FY2024 Earnings Call

Good afternoon. I'm Ana Soro from Palantir's finance team, and I'd like to welcome you to our Third Quarter 2024 Earnings Call. We'll be discussing the results announced in our press release issued after the market closed and posted on our investor relations website. During the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements regarding our fourth quarter and fiscal 2024 results, management's expectations for our future financial and operational performance, and other statements regarding our plans, prospects, and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed after the market closed today and in our SEC filings. We undertake no obligation to update forward-looking statements except as required by law. Further, during the course of today's call, we will refer to certain adjusted financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from GAAP measures. Additional information about these non-GAAP measures, including reconciliation of non-GAAP to comparable GAAP measures, is included in our press release and investor presentation provided today. Our press release, investor presentation, and other earnings materials are available on our investor relations website at investors.palantir.com. Over the course of the call, we will refer to various growth rates when discussing our business. These rates reflect year-over-year comparisons unless otherwise stated. Joining me on today's call are Alex Karp, Chief Executive Officer; Shyam Sankar, Chief Technology Officer; Dave Glazer, Chief Financial Officer; and Ryan Taylor, Chief Revenue Officer and Chief Legal Officer. I'll now turn it over to Ryan to start the call.

Our results are exceptionally strong. Revenue grew 30% year-over-year in Q3, driven by an intensifying AI revolution that the U.S. is rapidly driving. Our U.S. business achieved 44% year-over-year and 14% sequential revenue growth. We are focused on deploying AI models in production, amidst the commoditization of cognition caused by the rapid advancement in AI models. Our U.S. government business revenue growth accelerated to 40% year-over-year and 15% sequentially, while our U.S. commercial business momentum continued with 54% year-over-year and 13% sequential revenue growth. This AI revolution that is transforming industry, as well as government is also transforming markets. In September, the S&P 500 added Palantir to its index, a testament to our exceptional growth, profitability and market leadership amidst this singular era of accelerating technological progress. We're witnessing the commoditization of cognition with the rapid advancement of AI models. Almost all investment in the AI space has been focused on supplying and improving these models. What will differentiate the AI haves from the have-nots, is the ability to maximally leverage these models in production by capitalizing upon the rich context within the enterprise. This is Palantir's focus. We see this in the results we're delivering for our customers. Those who embrace quantified exceptionalism through AIP are able to take advantage of the commoditized cognition in a levered way to advance their differentiation. In this winner-takes-all AI economy, the divide is widening between those who are leveraging AIP and those who are not. At a leading global insurance organization, AIP has helped automate key underwriting workflows, reducing the typical underwriting response time from over two weeks to three hours. We implemented over ten business use cases in just nine months at Associated Materials, increasing its on-time and full delivery rates from 40% to 90%. At Trinity Rail, it took just three months to get to a functional workflow with a $30 million impact to its bottom line. Last quarter, we closed 104 deals, over $1 million. The evolving deal cycle as we take customers from prototype to production is having a particularly phenomenal effect on the growth of our U.S. Commercial business, which continues to see AIP driven momentum both in expansions and new customer acquisitions. In U.S. Commercial, we closed nearly $300 million of TCV and customer count grew 77% year-over-year compared to 37% year-over-year in Q3 2023. To highlight a few notable deal cycles, a large American equipment rental company expanded its work with us less than eight months after converting to an enterprise agreement, increasing the account ARR twelve-fold. A bottled water manufacturer, a specialty pharmaceutical company and an agricultural software provider all signed seven-figure ACV deals less than two months after their initial boot camps. In our U.S. Government business, we are outfitting our warfighters with advantages over our adversaries. Last quarter marked our U.S. government businesses continued strength through the end of the U.S. government fiscal year. It was our strongest sequential growth in 15 quarters, driven largely by our DoD businesses 21% quarter-over-quarter growth. We remain proud of our progress delivering the next generation Targeting Node through Titan with our efforts fully ramping throughout Q3. Palantir is also delivering AI through Maven Smart System, allowing customers like the 18th Airborne to match the performance of what used to be a 2,000 staff targeting cell during Operation Iraqi Freedom to a targeting cell of roughly only 20 people today. Last quarter, Palantir signed a new five-year contract to expand these Maven Smart system AI ML capabilities across the U.S. military services including the Army, Air Force, Space Force, Navy and U.S. Marine Corps. As Vice Admiral Frank Whitworth recently said, this partnership is tantamount to ensuring that we keep America safe and ready. The AI revolution is underway now. The chasm between the AI haves and have-nots is rapidly widening and the whole world is watching. I'll now turn it over to Shyam.

Thanks, Ryan. The divide between AI haves and have-nots is rapidly accelerating in this winner-takes-all AI economy. What will differentiate the AI haves from the have-nots is the ability to maximally leverage these models in production by capitalizing upon the rich context within the enterprise. That's why our focus on delivering proof, not proof of concepts continues to pay off. Years of foundational investments in our infrastructure and in our ontology have positioned us uniquely to harness and deliver on AI demand. This is Palantir's focus. The market has been focused on AI supply—the models. We see this clearly in the progress, but also in the capital sunk into these models. Indeed, the models continue to improve, but more importantly, the models across both open and closed source are becoming more similar. They are converging, all while pricing for inference is dropping significantly. This only strengthens our conviction that the value is in the application and workflow layer, which is where we excel. Tapping into this rapidly expanding pool of leverage from AI labor means more than just saving money. It means a massive acceleration of results for our customers. As Ryan mentioned, we have automated the insurance underwriting process for one of America's largest and most well-known insurers with 78 AI agents, taking a process that took two weeks to three hours. More than the labor savings, this presents the customer with an asymmetrical advantage in the marketplace to bind contracts before the competition has even gotten through 15% of their process. In U.S. government, we automated the foreign disclosure process for sharing critical and timely intelligence with allies from three days to three hours. The Center for Security and Emerging Technologies at Georgetown published a study on Maven that showed how the entire targeting and fires process can be done in Maven with 20 people; it used to take 2,000. There is a huge opportunity for our customers to automate the tail and liberate capital to reinvest in the tooth across government and commercial; we see enterprise autonomy as a key theme in our proof. Our deep investments in CJADC2 Combined Joint All Domain Command & Control continue to meet their moments. First and foremost, Maven has powered responses to real world events across the globe. This past quarter the Army was the first military department or MILDEP to adopt Maven. We're happy with the progress that we continue to make with Army Titan and AIDP and Palantir's role as the application integrator in the Joint Fires Network. Maven is our military's fight tonight solution at a time when North Korean troops are in Ukraine, Russia is providing satellite intelligence to the Houthis and Iran is launching ballistic missiles at allies. We are investing aggressively to expand the perimeter to give our warfighters the unfair advantage they deserve, advanced multi-INT sensor fusion, integrated logistics into fires and large scale command and control of swarms of autonomous systems. We announced warp speed last quarter, our modern American manufacturing operating system. We as a nation must reindustrialize to prevent escalating conflict and regain deterrence. Before the fall of the Berlin Wall, only 6% of major weapons systems spend went to defense specialists, the so-called primes. 94% went to dual-purpose companies who were invested in both freedom and prosperity. Chrysler built cars and missiles, Ford built satellites until 1990, and General Mills, the cereal company, made weapons. Today, that 6% has become 86% when including firms whose only commercial exposure is in aerospace. We won World War II and the Cold War with an American industrial base, not a defense industrial base, and we need to bring that back at warp speed. In addition to working with new champions like Anduril and Shield AI, we're also working with L3Harris and two other of the big primes to help them bend atoms better with bits. Lastly, we continue to invest in AIP as a developer platform. Green suitors at the 18th Airborne Corp built 15 applications in our developer environment for their August warfighter exercise. The Army Software Factory is cranking out software at units in Europe and even for the Vice Chief of Staff of the Army. The 101st built their search and rescue common operating picture to power Hurricane Helene response, built entirely by uniformed service members. We have released our JADC2 SDK including examples and documentation for government and third-party developers to start building on our platform, and we have DevCon this month, our first gathering specifically for AIP platform developers across commercial and government, where we will be releasing a ton of new product investments, an enhanced OSDK, more ergonomic compute modules, the multimodal data plane and much more. I'll turn it over to Dave to talk us through the financials.

Thanks, Shyam. Q3 was an exceptionally strong quarter, as revenue growth accelerated to 30% year-over-year, exceeding the high end of our prior guidance by nearly 450 basis points. As America rapidly embraces the AI revolution, this increase in AI demand has driven the outperformance in our U.S. business, which grew 44% year-over-year. Our U.S. commercial business grew 54% year-over-year and 13% sequentially. Our U.S. government business grew 40% year-over-year and 15% sequentially, a sevenfold increase compared to the prior year period growth rate and the strongest growth we've seen in 15 quarters. On the back of this strength, we are increasing our full year revenue guidance midpoint to $2.807 billion, representing a 26% year-over-year growth rate. We delivered these outstanding top line results while expanding adjusted operating margin to 38%, highlighting the strong unit economics of our business. Our revenue and profitability drove a four-point sequential increase to our Rule of 40 score from 64 in the second quarter to 68 in the third quarter. We had an exceptional cash flow quarter with cash from operations of $420 million and adjusted free cash flow of $435 million representing margins of 58% and 60% respectively. On a trailing 12-month basis, we generated over $1 billion in adjusted free cash flow for the first time in the company's history. We are also proud to have joined the S&P 500 last quarter, underscoring our sustained profitability and growth. Turning to our global top line results, revenue continues to accelerate, as we see continued momentum from AIP. We generated $726 million in revenue, up 30% year-over-year and 7% sequentially. Excluding the impact of revenue from strategic commercial contracts, third quarter revenue grew 32% year-over-year and 7% sequentially. Customer count grew 39% year-over-year and 6% sequentially to 629 customers. Revenue from our largest customers continues to expand. Third quarter trailing 12-month revenue from our top 20 customers increased 12% year-over-year to $60 million per customer. Now moving to our Commercial segment. Third quarter Commercial revenue grew 27% year-over-year and 3% sequentially to $317 million. Excluding the impact from strategic commercial contracts, Commercial revenue grew 30% year-over-year and 3% sequentially. Third quarter Commercial TCV booked was $612 million, representing 52% growth year-over-year and 62% growth sequentially. Our U.S. Commercial business continues to see unprecedented demand with AIP driving both new customer conversions and existing customer expansions in the U.S., as we continue to deploy AI models in production. Third quarter U.S. Commercial revenue grew 54% year-over-year and 13% sequentially to $179 million. Excluding revenue from strategic commercial contracts, U.S. Commercial revenue grew 59% year-over-year and 12% sequentially. In the third quarter, we booked $297 million of U.S. commercial TCV, representing 13% growth sequentially. Total remaining deal value in our U.S. commercial business grew 73% year-over-year and 7% sequentially. Our U.S. commercial customer count grew to 321 customers, reflecting 77% growth year-over-year and 9% growth sequentially. We generated $138 million in international commercial revenue in the third quarter representing 3% growth year-over-year, but a 7% sequential decline as a result of continued headwinds in Europe and a step down in revenue from a government sponsored enterprise in the Middle East. Despite those headwinds, we continue to build on our transformational work with some of our largest international customers, including signing a multi-year renewal with BP. We also continue to capitalize on targeted growth opportunities in Asia, the Middle East and beyond. Revenue from strategic commercial contracts was $9.6 million for the quarter. We anticipate fourth quarter 2024 revenue from these customers to decline to between $6 million to $7.5 million compared to $20 million in the fourth quarter of 2023. We continue to anticipate 2024 revenue from these customers to be less than 2% of full year revenue. Shifting to our Government segment. Third quarter Government revenue grew 33% year-over-year and 10% sequentially to $408 million. Third quarter U.S. government revenue accelerated to $320 million, representing 40% growth year-over-year and 15% growth sequentially. This acceleration was driven by continued execution in existing programs, new awards reflecting the growing demand for AI in our government software offerings and favorable deal timing in the quarter, coupled with government year-end cycle. Third quarter international government revenue was $89 million, representing 13% growth year-over-year, but a 5% sequential decline as a result of revenue catch up in Q2 that we noted last quarter and less favorable deal timing. Third quarter TCV booked was $1.1 billion, up 33% year-over-year and 16% sequentially. Net dollar retention was 118%, an increase of 400 basis points from last quarter. The increase was driven both by expansions at existing customers and new customers acquired in Q3 of last year, as we see the effect of the AI revolution in both industry and government. As net dollar retention does not include revenue from new customers that were acquired in the past 12 months, it does not yet fully capture the acceleration and velocity in our U.S. business over the past year. We ended the third quarter with $4.5 billion in total remaining deal value, an increase of 22% year-over-year and 4% sequentially and $1.6 billion in remaining performance obligations, an increase of 59% year-over-year and 15% sequentially. As a reminder, RPO is primarily comprised of our commercial business, as it does not take into account contracts within an initial term of less than 12 months and contractual obligations that fall beyond termination for convenience clauses, both of which are common in most of our government business. Turning to margin and expense, adjusted gross margin, which excludes stock-based compensation expense was 82% for the quarter. Adjusted income from operations, which excludes stock-based compensation expense and related employer payroll taxes was $276 million, representing adjusted operating margin of 38% and marking the eighth consecutive quarter of expanding adjusted operating margins. Q3 adjusted expense was $450 million, up 6% sequentially and 14% year-over-year, primarily driven by our continued investment in AIP and technical talent. We continue to expect expenses to ramp through the fourth quarter as we invest in the product pipeline and accelerate the journey from AI prototype to production. In the third quarter, we generated GAAP operating income of $113 million, representing a 16% margin. We generated GAAP net income of $144 million, representing a 20% margin. Third quarter adjusted earnings per share was $0.10 and GAAP earnings per share was $0.06. As previously communicated, we've aligned our compensation program with the performance of the company's goals, including its stock price. On the back of the company's strong performance, our inclusion in the S&P 500 and the increase in our stock price, we will continue to monitor if we become required to accelerate stock-based compensation expenses if certain market-based vesting criteria are achieved earlier than expected. Additionally, our combined revenue growth and adjusted operating margin accelerated to 68% in the third quarter, a four-point increase to our Rule of 40 score from the prior quarter. Turning to our cash flow. In the third quarter, we generated $420 million in cash from operations and $435 million in adjusted free cash flow, representing a margin of 58% and 60% respectively. For the first time ever, on a trailing twelve-month basis, we generated over $1 billion in adjusted free cash flow representing a margin of 39%. Through the end of the third quarter, we repurchased approximately 1.8 million shares as part of our share repurchase program. As of the end of the quarter, we have $954 million remaining of the original authorization. We ended the quarter with $4.6 billion in cash, cash equivalents, and short-term U.S. treasury securities. Now turning to our outlook, for Q4 2024, we expect revenue of between $767 million and $771 million and adjusted income from operations of between $298 million and $302 million. For full year 2024, we are raising our revenue guidance to between $2.805 billion and $2.809 billion. We are raising our U.S. Commercial revenue guidance to an excess of $687 million, representing a growth rate of at least 50%. We are raising our adjusted income from operations guidance to between $1.054 billion and $1.058 billion. We are raising our adjusted free cash flow guidance to an excess of $1 billion and we continue to expect GAAP operating income and net income in each quarter of this year. With that, I'll turn it over to Alex for a few remarks and then Ana will kick off the Q&A.

Given the strength of our results, I feel we could almost wrap up for the day. However, we've maintained since our public listing that we aim to build systems to establish America and its allies as a dominant global force. There was significant skepticism surrounding our ability to deliver this via software solutions, asserting that both defense and commercial sectors would increasingly rely on software and hybrid technologies, and that very few companies globally could achieve this, most of which are based in America. Companies attempting this that are not Palantir are often founded by former Palantir employees. We believe that the success of Palantir stems from our products, our culture, and our execution, emphasizing that we stand for supporting and enhancing the safety of our allies and fellow Americans while upholding our values. Our commitment to highlighting the superiority of democratic and capitalist systems remains steadfast. We're proud to have built a company drawing top talent from around the globe, particularly from America, to empower our nation and its allies. We are surprised by the impressive 44% growth in the U.S. from a substantial $2 billion base. This is not a minor speculative increase. Our U.S. Government sector has shown a 40% growth, alongside a robust performance in U.S. commercial sectors. Allied nations are beginning to recognize that AI is pivotal in enhancing their defenses against ruthless adversaries, which necessitates a more effective and safer combat approach. It's remarkable to see the rapid adoption of crucial technology by America, regardless of its source. Our company is in its early stages, witnessing the American adoption both in government and commercial sectors without having to compromise our principles. We acknowledge that many sectors, such as insurance, oil and gas, manufacturing, supply chains, healthcare, defense, and intelligence, require innovative software development and implementation. The true value lies in the infrastructure we provide. Despite common beliefs among experts that a commodity like large language models is the most valuable aspect, we maintain that how you manage this commodity is where the real value exists. The market seems to favor what works, regardless of theoretical models. The clients supporting our growth—30% overall, 44% in the U.S., 40% in U.S. commercial, and a significant increase in U.S. government sectors—have made their preferences clear through their choices and implementations, and we take great pride in that. I'm particularly pleased to see a growing adoption among those in defense roles, with all branches of the U.S. government, including the White House and Congress, starting to incorporate large language models in their infrastructures—an area where Palantir excels. We are genuinely enjoying this stage of our company's journey. Throughout a long-term business evolution, there are ups and downs, but witnessing our strategies strengthen enterprises manifest in these impressive outcomes is incredibly rewarding, and we intend to keep progressing.

Thanks, Alex. We'll now turn to a few questions from our shareholders before opening up the call. We received a few questions on AI. How will Palantir differentiate its AI offerings from others, including the model creators? And how is AIP different? And how will Palantir maintain its competitive edge?

Well, Alex talked about how the models' arms are commoditized, but if you look at the models, you see that they're getting better, which is awesome. But they're also getting more similar across both closed and open source models, while they're improving, they're converging upon each other, all while the price of inference is dropping precipitously. And that's, so if you even look at these model companies, they have to build applications around these models to extract value. That's where we have a decade-long head start. We've been building the forge to create and implement AI applications at scale throughout the enterprise. And that differentiation starts with the ontology. Using the ontology to drive AIP across these applications. When you look at the legacy software companies, I'm not sure they understand it yet, but when you look at the innovative Silicon Valley companies, they recognize the wall of tech investments this implies that's in front of them that's going to act like a great filter.

I believe it's an addition to that statement. First, it's becoming clear that we were right, and the numbers reflect this. This leads to the understanding that a company capable of extracting value from large language models is particularly valuable. Many of our customers were skeptical about the utility of these models just a year ago. However, most of the customers I encounter still doubt whether large language models can be useful beyond basic experiments. Despite the advancements in the models, client skepticism has increased, as their experiences have often felt like high school experiments. The market and analysts seem to place a lot of credibility in these models, and we share that belief, provided they are managed correctly and used in a way that enterprise users can grasp. One challenge people face is that if they aren't involved in enterprise software, understanding how an enterprise operates can be difficult. You can't simply use a large language model that generates an ELO score of 1200 for battlefield targeting due to security models and data handling protocols. Certain models are appropriate for specific situations, and understanding how to integrate that information into critical decisions, like in high-stakes scenarios, is essential. Similar situations arise in underwriting and healthcare. Therefore, grasping the technical drivers of enterprise operations, as represented by Foundry and our enhanced abstraction layer, which incorporates our recent launches known as ontology powered by AIP, is something our clients are discovering daily. Their main realization is just how quickly they can complete tasks that once took them considerably longer. For instance, on the battlefield, we’ve highlighted a reduction in personnel requirements by two orders of magnitude, and similarly, there’s a two-order magnitude enhancement in productivity efficiency. There are global events today that would look quite different without our infrastructure's ability to manage these complexities, which is understandably creating a lot of internal excitement that contributes to our earnings.

Thank you. Our next question is from Ryan, who asks, as Palantir continues to invest in new AI technologies and expand globally, how are you balancing these investments with maintaining or improving profitability and operating margins, especially given the current macroeconomic challenges?

We are not just recovering; we are performing exceptionally well. Our revenue increased by 30% year-over-year in the third quarter, with a 44% rise in the U.S. alone. This is accompanied by our growing margins, as we achieved a 38% adjusted operating margin, marking our eighth straight quarter of margin expansion, and we scored 68 on the Rule of 40. Moreover, we recorded an impressive adjusted free cash flow margin of 60% for the quarter. Looking ahead, we are increasing our projections. We now expect adjusted free cash flow to surpass $1 billion for the full year 2024. We are also raising our adjusted operating income forecast to well over $1 billion, representing a 39% margin in the fourth quarter. This growth is happening while we invest at the forefront of the AI revolution, where there is immense demand, and we are focusing on acquiring technical talent and developing top-tier products.

There's a steel man version of this, which is given how well you're doing, given you've really accelerated to 30%, given the U.S. is growing 44%, why don't you blow up your Rule of 68, which by the way, to my knowledge is the single best in of comparable companies in the world and significantly better than many very strong companies. So an average normal way of looking at Palantir would be like, great, you have a 44% growth on a $2 billion base in the U.S. and you have a Rule of 68. Get that 68 down to 50 and maybe you can grow. But in fact, that way of looking at a business misunderstands the way in which Palantir builds. We believe that by investing and we know at this point, instead of trying to have 10,000 clients, all of whom hate you, that's kind of what people want, 10,000 clients that hate you, but they can't give you a product. We want a smaller number of the world's best partners that, quite frankly, are dominating with our product. And the way you do that is by not blowing up your margin and getting 10,000 salespeople; it's actually by going deeper on the product. And in fact, what we see is the deeper and the better the product, the more we drive sales, the more we have our cultural singular advantage as Palantir, not as a commodity product. It's like we are not a commodity. We do not want our customers to be commodities; we want them to be individual Titans that are dominating their industry or the battlefield. And we reflect that in how we do things. We are not trying to be your average Harvard Business School preferred company that crushes margins, has a thin product and then has a lower rule of 40 and presumably higher growth. By the way, I don't think you get higher growth than what we had, honestly, although we of course are always pushing and want even higher growth. The people who tend to ask these questions are those modeling companies with 20% growth and lower margins. We have 44% growth in the most important market in the world, arguably not the only, but by far the most valuable market in the world while having a Rule of 68, i.e., the best in the world. And we are going to maintain the contradiction of having both high margins and high growth. It's not one or the other. They're actually interplayed and they're not a contradiction. They power each other. That's how you have world-class products. That's what you see in your numbers.

Thank you both. Our next question is from Dan with Wedbush. Dan, please turn on your camera and then you'll receive a prompt to unmute your line.

A great quarter and congrats to you and the team. So my question is with boot camp conversions, has it even surprised you just how quickly from a customer coming into a boot camp, potential customer to conversion to megadeals, what you're seeing and what do you think that says about your process and where we are in this AI revolution where Palantir sits?

Yeah. I think obviously the most indicative of what we're seeing and the impact is the results, 44% year-over-year growth in U.S. Commercial. 54, sorry, 44% year-over-year growth in U.S., 54% in U.S. Commercial the sequential growth we're seeing. I think, I gave examples of boot camps where we're seeing multiple different customers across different industries that are going from, from the initial boot camp to a seven-figure ACV deal within a matter of less than two months. We're seeing that, we're feeling that in the conversations we have with customers and then our push to go from prototype to production and the expansions we're seeing at customers. And I'm seeing that, in the conversations, as we said, really, it's going to be, it's going to be the AI haves and the have-nots. The haves are moving quickly, making decisions quickly, and adopting quickly, and I'm feeling that in the conversations we have with them, in the conversions we're seeing.

I would just say that the most surprising thing is just how there's a small number of increasingly large number of customers, meaning that get this and they are just moving really quickly, and anyone who's involved in the enterprise. So if you take company XYZ and then five people go to a different company, the first thing they do is pick up the phone and call us. And then and so it just the way in which this just expands in the U.S. quite and in some other countries, but especially in the U.S. from anyone who touches this wants to use it in any part of anything they're doing. And it goes from one person. And then there's this transience in America where people really are moving to different companies a lot and they're talking to each other. And there's just a willingness to take business metrics and use those business metrics against technology. That's not ideological. And if you look at even 10 years ago, there was no form of software that had this kind of adoption and this kind of readiness. And also it was conversely just not possible to show this kind of results this quickly. And we tend to focus on the results on the outside, but in AI and large language models also allow us to scale our product on the inside. So one of the unfair things about this revolution is if you have business acumen and you have a product that is good or stellar, in my humble opinion, you can make it even better internally and externally. And so that allows us to also scale many, many more people to many, many organizations with the same number of people, as long as they're the best in the world. And so it's really this from touch to expansion. However we do it, some of its boot camps, but some of it's just like hey, I used to work at a company, I heard really good things about your product, I want it tomorrow. How quickly can you get here? What is the first use case you could do? And then the first thing that they always ask is, well, show me some of the things that you've done in other places like I even cross-fertilization between government and non-government, I was at an important government entity a couple of weeks ago and they obviously Maven would be very useful for them. But then they start asking, well, what are you doing for hospitals? Could you use this on FOIA requirements? Could you use the same thing for managing our people? How could you make sure that our people are safe and happy? How do you move parts? How do we do procurement? A lot of the things that Shyam, so there's like a massive cross-fertilization even between verticals that otherwise would never talk. In the past, government use cases did not, non-government use cases were just not things we were doing in government, and certainly from industry to industry, we did not have this from real estate to supply chain to large hospital things, the use cases that they're doing inside our product they are technically basically the same for us.

Thank you. Our next question is from Mariana with Bank of America. Mariana, please turn on your camera and then you'll receive a prompt to unmute your line.

Good afternoon, everyone.

Hi.

Hey.

So on government, U.S. government is up like 40%, and this is in line with what we saw at USA L3Harris, Andrea, Chile, but others were advertising Palantir logos and they were like advertising partnership with you. What changed for them to actually want a partner? That's the first one. And then Dave, if you don't mind giving an update on the strategic commercial contracts and how are you thinking about the remaining deal value as we see news about Lilium, but also a recent pickup of some stock awards as a form of payment from these companies. Thank you.

On the first bit here, there's really two dimensions to what we're seeing is acceleration in partnerships on the U.S. government side. The first is something I've talked about earlier, which is mission manager, really how do we take not our software, but our software infrastructure, Rubik's and Apollo as radical accelerants for these companies to get to revenue, to service their existing revenue in a more profitable way and expand their market access. So that's been just a clear win across the board, that's good for the government, it's good for these partners and it's good for us.

I don't think Shyam is getting enough recognition here, along with Ake and others. One of the main challenges we face with the U.S. Government is simply related to friction. We've prioritized assisting U.S. government allies first and we are secondary in this focus, which is why so many of us around this table are still here. A couple of years back, there was a general idea that Palantir was winning too much, and people believed that if we were making significant profits, someone else must be losing out. Shyam, Ake, and others did an excellent job emphasizing that our goal is the supremacy of the U.S. and its allies. We aimed to demonstrate this by allowing access to parts of our products that can work with government data. Many people assume that you can simply apply a product to government data, but it's not that straightforward. We've developed a number of tech solutions that enable safe and secure collaboration with the U.S. government. We've started providing these solutions to various defense tech startups and have partnered with established integrators like L3 and others. The idea was that if we truly stand by our beliefs, we need to showcase them. This approach, which Shyam spearheaded and Ake supported, has resulted in most involved in tech innovation now seeing Palantir as an ally. Rather than entering discussions with skepticism, people now recognize that our products are top-notch. This shift is crucial and stems from a business strategy implemented by others, enhancing our market access as most people are now eager to collaborate rather than resist.

Alex, is always a tough act to follow, but the second part of that I'll just close out with is really helping these companies with their production. In the same way that we help Airbus build every plane or Chrysler build every car, how do we help L3 and roll and shield and all of these new entrants and existing primes build their weapon systems better, and in particular where they have fixed price drive margin expansion as a consequence of doing that.

And then on the strategic commercial contracts, they're a tiny part of the business, right, basically 1% of revenue in Q3, on the forward looking metrics which is even like it's quite de minimis and the program ended three years ago. So we can still answer the question; it's basically not relevant anymore.

Thank you. Alex, we have a lot of individual investors on the line. Is there anything you'd like to say before we end the call?

As usual, we're in it together with you. Besides making America even stronger and better and our allies stronger, better and all of us more lethal, besides protecting Palantirians and most ex-Palantirians that our individual investors are near and dear to our and certainly my heart, and I love it that you guys are winning. There will always be ups and downs in building a business, but we're definitely fighting for you guys. And the decision to do a DPO where we which is essentially a was a decision to make sure that individuals got to participate and your willingness to spend time and look at what we're doing and actually look at the facts on the ground and not just to read theory has been crucial to Palantir as a business and it's part of what makes Palantir great and also our nation so great. So thank you and thank you for your support.

Thank you. That concludes Q&A for today's call.