Item 1. Business
ITEM 1. BUSINESS
Overview
We build software that empowers organizations to effectively integrate their data, decisions, and operations at scale.
We were founded in 2003 and started building software for the intelligence community in the United States to assist in counterterrorism investigations and operations. We later began working with commercial enterprises, who often faced fundamentally similar challenges in working with data.
We have built three principal software platforms, Palantir Gotham (“Gotham”), Palantir Foundry (“Foundry”), and Palantir Apollo (“Apollo”). Gotham and Foundry enable institutions to transform massive amounts of information into an integrated data asset that reflects their operations. For over a decade, Gotham has surfaced insights for global defense agencies, the intelligence community, disaster relief organizations and beyond. And Foundry is becoming a central operating system not only for individual institutions but also for entire industries. Apollo is a cloud-agnostic, single control layer that coordinates ongoing delivery of new features, security updates, and platform configurations, helping to ensure the continuous operation of critical systems and allowing our customers to run their software in virtually any environment.
Recent crises and systemic shocks, such as the ongoing COVID-19 pandemic and the ongoing Russia-Ukraine conflict, have made clear to many of our customers that accommodating the extended timelines ordinarily required to realize results from implementing new software solutions is not a viable option. As a result, customers are increasingly adopting our software, which can be ready in days, over internal software development efforts, which may take months or years. See further discussion
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in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Macroeconomic Trends . ”
Our Platforms
We have built three principal software platforms: Gotham, Foundry, and Apollo. Our software platforms provide the critical infrastructure needed to integrate our customers’ data and operations and run their software in virtually any environment.
The vertically integrated nature of Gotham and Foundry allows users of varying technical abilities to collaborate effectively in our platforms. Data engineers can integrate new data sources, analysts can clean and transform data, data scientists can write models, business users can conduct daily workflows, and senior leaders can make critical decisions. The two platforms can either be used separately or bundled together as a single ecosystem.
Data, analyses, decisions, and the metadata around each are secured with fine-grained access controls that propagate from source data to shared analyses. Each platform is comprised of user-facing applications that are targeted to the specific industries and sectors in which they are used.
Despite their differences, Gotham and Foundry both serve as central operating systems for our customers. Where they vary in specific functionality, they align in approach. Both platforms, backed by Apollo, can be deployed in almost any environment.
Similarly, customers can now use Apollo to enable continuous deployment, configuration management, and central software operations management across almost any environment for their own software products.
Gotham
Gotham enables users to identify patterns hidden deep within datasets, ranging from signals intelligence sources to reports from confidential informants. It also facilitates the hand-off between analysts and operational users, helping operators plan and execute real-world responses to threats that have been identified within the platform. Gotham is now used broadly across government functions.
We also offer Gotham to our commercial customers, including to those in the financial services industry in connection with fraud investigations.
Foundry
Foundry transforms the ways organizations operate by creating a central operating system for their data. Individual users can integrate and analyze the data they need in one place. The speed with which users can experiment and test new ideas is what makes the software stick.
Data projects often fail because the steps and methods used to build data pipelines are difficult to understand and recreate. We built Foundry’s backend to solve the root of this problem. The platform’s graphical interface does the rest, allowing users to track and trace their pipelines so they know what the rows and columns in their tables represent and why they are there. All of our commercial customers now use it, as do several of our government customers.
Apollo
We have always prioritized meeting our customers wherever they need us most. We originally built Apollo to enable the continuous delivery of our software wherever our customers are: in the cloud, on-premises, or even more rugged environments. Today, Apollo enables the rapid, secure delivery of our software and updates across our business.
In 2021, we began offering Apollo as a commercial solution to allow our customers to securely deploy their own software in virtually any environment. Apollo provides a single control layer to coordinate ongoing delivery of new features, security updates, and platform configurations.
Our Customers
We work with many of the world’s leading government and commercial institutions. As of December 31, 2022, we had 367 customers.
An overview of those customers and the ways in which they use our software follows below.
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Overview
Our software is currently used across more than 60 industries around the world.
Of the $1.9 billion in revenue that we generated in 2022, 56% came from customers in the government segment, and 44% came from customers in the commercial segment.
Our business continues to have a global presence. In 2022, we earned 61% of our revenue from customers in the United States, and 39% from those abroad.
The average revenue for our top twenty customers during the trailing twelve months ended December 31, 2022 was $49.4 million, and is up from 2021, when the average revenue from our top 20 customers during the trailing twelve months ended December 31, 2021 was $43.6 million, demonstrating our expanding relationships with existing customers.
Our Software at Work
Our software is in the hands of factory workers, soldiers, clinicians, prosecutors, investigators, claims adjusters, technicians, intelligence analysts, and social workers around the world. It is used in a variety of applications including by utility operations analysts, automotive manufacturing workers, oil and gas technicians and operators, and pharmaceutical researchers in the United States; supply-chain managers in South Korea; assembly workers in France; public health administrators in the United Kingdom and the United States; and special forces personnel and military officials in the United States and abroad.
Industries and Sectors
In addition to supporting individual institutions, our platforms have become central operating systems for entire industries and sectors.
Our work with Airbus S.A.S. (“Airbus”), for example, was initially focused on the production of the A350 aircraft. The deployment of our software soon grew into Skywise, our aviation platform that has become the central operating system of the airline industry.
Skywise connects more than 10,000 aircraft across a growing community of airlines, maintenance and repair organizations, authorities, and Airbus. Decision makers at each of these institutions use Skywise to more efficiently design, manufacture, service, operate, and maintain their global fleets.
Our work with healthcare organizations across both the commercial and government sectors in the United States and globally has helped modernize public health information systems, including by facilitating pandemic management across U.S. and non-U.S. government agencies, integrating and harmonizing clinical trial data, and enabling proactive coordination across multi-threaded teams to effectively respond to real-time changes in patient demand and nursing supply.
Similarly, when it comes to our work with defense and intelligence agencies, our software is not only used by individual organizations but is also used to enable sharing of information and collaboration across agencies and countries. This is made possible by our software’s access controls, which enable agencies to work on the same platform simultaneously and securely.
Sales and Marketing
Our approach to sales and marketing is built around discussions with existing and prospective customers in order to understand the principal challenges our customers face and identify ways in which our software platforms can provide long-term value and results.
Customer Acquisition
Our customer acquisition strategy targets large-scale, hard-to-execute opportunities at large government and commercial institutions. The high installation costs, high failure risks, complexity of data environments, and the long sales cycles associated with these opportunities raise the barriers to entry for competition. The larger, more complex, and more technologically demanding the problem, the more likely we are to succeed. Additionally, our focus in the short term remains making our principal software platforms available to an increasingly broad swath of our potential market. We believe that every institution faces challenges that our platforms and products were designed to address.
Across both the public and private sectors, there is a history of failures when investing in new technologies. One U.S. military department spent more than $1 billion building an enterprise resource planning system from scratch. The system was never delivered, and the project was terminated.
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Many of our customers have had similar experiences investing millions — even billions — of dollars in digital transformation projects, enterprise data warehouses, and digital twin initiatives that never really worked.
These failures have made both software buyers and vendors highly risk-averse. Institutions often doubt that any vendor can implement a working solution and are unwilling to invest. On the other hand, smaller technology companies are often unable to compete for complex, large-scale opportunities because installation costs and the risks of failure are too high, and the sales cycles too long.
These are precisely the opportunities we target. Rather than reject projects with risky and resource intensive installation requirements, we actively seek them out.
There are a number of sales and marketing strategies that have accelerated our ability to acquire customers in recent years:
Expansion of Access to Platforms
The speed with which our platforms can be deployed has significantly expanded the range of potential customers with which we plan on partnering over the long term. We anticipate that our reach among an increasingly broad set of customers, in both the commercial and government sectors, will accelerate moving forward. We believe that, as these new partners grow, we will grow with them.
We have also made a number of investments in companies whose businesses rely on the ability of their organizations to manage and analyze data effectively at scale, though we do not currently anticipate entering into new investments to purchase, or commit to purchase, securities of special purpose acquisition companies.
Our proximity to these businesses and the industries in which they are operating has enhanced, and is expected to continue enhancing, our own product and business development efforts, as we continue expanding access to our platforms to the broadest possible set of customers.
Direct Sales Force
We have invested and continue to invest in an account-based sales force to identify and capture new customers and opportunities.
We believe that our decision to grow our sales force in recent years has resulted in multiple new customers, broadening and expanding our commercial customer base and relationships with leading government agencies around the world.
Sector and Industry Platforms
We are developing industry operating systems to help companies and government agencies manage operations across their entire organizations. These operating systems allow our software to be distributed at scale to institutions within given industries.
For example, Skywise is our aviation platform that we have developed in partnership with Airbus. Our approach with Airbus involves a collaborative go-to-market strategy to distribute the Foundry platform across the aviation industry. The adoption of our software has been swift. Since June 2017, Skywise has expanded from zero to more than one hundred airlines on the platform. Each one is now an existing or potential customer.
We are working on similar partnerships in the insurance, healthcare, automotive, and government sectors, which we anticipate will have a significant impact on our business moving forward.
U.S. Government
We intend to capture an even greater share of U.S. federal government spending on software systems, following our 2018 legal victory in federal court. The ruling requires the government to consider commercially available products, such as our software, before attempting to build its own.
See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Our Customers” for a discussion of the terms of our government contracts.
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Channel Sales & Cloud Partnerships
We have entered into, and continue to explore the development of, channel sales partnerships for specific industries and sectors by partnering closely with leading providers of public, private, and hybrid cloud services, which have relationships with essentially every major enterprise in the world and have large, existing sales forces.
This channel emerged as an extension of the large computing requirements for our platforms and the migration towards the cloud as the hosting environment of choice for many customers. The existing footprint of these providers provides us with access to their large customer base and expands our distribution capabilities.
Joint Ventures & New Business Partnerships
We intend to continue to form joint ventures and new business partnerships, where we believe specific industries or sectors require a partner and additional investment in order to realize the full potential of our platforms.
Account Growth
There are a number of sales and marketing strategies that we use to drive revenue growth at an account.
These strategies include (i) creating new ecosystem partnerships to extend the platform beyond the customer’s four walls into the operations of its partners and suppliers, (ii) selling additional productized cross-industry software capabilities, and (iii) selling strategic implementations of our software against specific use cases, which deliver competitive differentiation.
Our sales and marketing strategies allow us to scale existing customer contracts horizontally to include additional divisions or functions within a single institution and vertically to include additional users and user groups. In tackling the customer’s most pressing and challenging problems first, we establish the trust needed to expand platform usage across the full enterprise.
Research and Development
We believe that in order to fully address the most complex and valuable challenges that our customers face, we must experience and understand their problems firsthand. To do so, we embed with our users. Our research and development function is responsible for the design, development, testing, validation, and refinement of our platforms, and embedding with our users allows us to identify research and development opportunities for our platforms or new products. We focus on innovating and developing new features and modules for our existing platforms, or new products, and further enhancing the functionality, reliability, usability, and performance of our platforms. By leveraging the tens of thousands of front-line hours across various industries and using emerging technologies, we can better anticipate customer needs and bring new use cases and new applications of existing services to our existing and potential customers. Many of our current research and development efforts are focused on deploying software, models, and other critical assets at the edge. This includes integrations with complex hardware, operations in disconnected environments, and more. We have made, and will continue to make, significant investments in research and development to broaden our platform capabilities, strengthen our existing platforms and innovate.
Privacy and Civil Liberties
We are committed to ensuring that our software is as effective as possible while preserving individuals’ fundamental rights to privacy and civil liberties. We have made deep investments to ensure that safeguarding privacy and civil liberties protections remains central to our software and business practices.
Our platforms were built from the start to protect individual privacy and prevent the misuse of information. We are not in the business of collecting, mining, or selling data. We build software platforms that enable our customers to integrate their own data — data that they already have.
The same technology that makes Palantir so analytically powerful — its ability to construct a model of the real world from countless data points — is what allows our customers to monitor and control access to that data and its use.
Principles
As we build and implement technology to answer questions of increasing significance and complexity, we follow a set of principles that help us ensure we are doing so responsibly.
• Systems should incorporate principles of “privacy by design.” Our goal has always been to eliminate the perceived trade-offs between privacy and utility. To do so, we treat privacy as a first-order concern at every stage of the engineering process and build privacy features as core capabilities in our platforms, seamlessly integrated with analytical and collaboration tools.
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• Decisions that can affect individuals’ rights to freedom, opportunity, and happiness cannot be left solely to computers. Our customers are using data to inform decisions with significant implications for individuals. Rather than relying on algorithms that inhibit accountability and redress, we build in means for humans to make necessary judgment calls based on their context and intuition.
• Systems must facilitate accountability and oversight. Effective privacy protection entails multi-layered, overlapping policies and procedures to reassure the protection of fundamental rights. We design our platforms to support these policies with mechanisms that control usage, alert users to data handling requirements, and generate information for those responsible for oversight.
• Technology is not the answer to every problem. Some decisions carry implications that are too complex or significant to be automated or streamlined, even with a human in the loop. We strive to contextualize major world problems and think critically about whether it’s possible to engineer complementary solutions in an ethically responsible way. When the answer is no, we turn the opportunity down. Privacy and civil liberties engineering is an evolving field, and every organization is subject to unique requirements and concerns. The ways in which these principles are realized will differ among products and organizations. But the end goal should be the same: developing and implementing technology with a full understanding of its potential effects on fundamental rights and incorporating technical capabilities that can support responsible data handling policies.
Customer Impact
Some examples of the ways in which our software facilitates data protection at our customers follow below.
• Our platforms provide a secure, privacy-protective cloud-based data enclave to centralize data on COVID-19 for collaborative clinical research.
• Our platforms serve as the central analytics system of a major law enforcement agency in northern Europe. Scandinavia has long been at the forefront of data protection, and our software facilitates effective implementation of its rigorous privacy policies.
• A customer in Europe needed to adhere to rigorous purpose specification and proportionality requirements during sensitive analytical workflows. We worked with the customer to implement technical measures requiring analysts to provide reviewable justifications for access. Those controls were further supported by auditing capabilities to ensure that data processing satisfied legitimate purposes under the relevant regulations.
• A multinational insurer sought to build and apply machine-learning models to surface fraudulent insurance claims, while ensuring that processing was sufficiently transparent, interpretable, and accountable to decision makers and oversight authorities. We helped to configure and implement a number of supporting privacy-enhancing features, including pseudonymization processes to minimize data exposure, rigorous documentation of machine learning model features and parameters, and auditing tools for users and regulators.
Our Team
We employ a team of engineers, lawyers, and social scientists to ensure that our company remains a leader in the field when it comes to privacy practices and software development.
The Privacy and Civil Liberties Engineering team is responsible for ensuring a culture of responsibility around the development and use of our technology by leading the development of privacy-enhancing technologies, publishing research, consulting with policymakers, helping our customers implement data governance best practices, and facilitating company-wide dialogue on ethical issues. The team is supported by the Palantir Council of Advisors on Privacy and Civil Liberties, a group of independent experts in privacy law, policy, and ethics who help us to understand and address the implications of our work.
Privacy-Enhancing Technologies
• Access Controls. Our platforms provide highly granular access restrictions with subtle and flexible access permissions, such as temporal and purpose-based limitations. This allows for precision data management — even, at times, across multiple, independent databases — that closely aligns access with customer specifications. For example, a user sees only the specific information necessary for a defined task (e.g., investigating a specific crime or determining whether to extend credit to an individual).
• Sensitive Data Inference. Institutions managing sprawling collections of data often struggle to keep track of which data assets include sensitive fields such as personal identifiers or health records. Our software provides inference tools to assist institutions in detecting the presence of such data so that they can flag and handle the data appropriately.
• Federation. Federation allows users to search and analyze data from multiple, independent databases without duplicating and centralizing data in a single place. Our platforms provide intelligent query interfaces that reduce the
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complexity of federation so that users can access the information they need without directly integrating the source into the platform.
• Audit Logging and Analysis. User actions — including searches, data use justifications, access requests, analyst collaborations, and report generation — within a system must be recorded to ensure that authorized oversight entities, both internal to an institution and external, can confirm appropriate and lawful data usage. Our platforms maintain audit logs and make them accessible to (and readable by) authorized users to help them both retroactively investigate and proactively identify misuse of systems.
• Data Integrity and Redress. Our platforms track the provenance and version history of all data in the system so that users can assess the reliability of the data and review and correct inaccuracies. Providing users with well-curated, up-to-date data reduces the risks of erroneous conclusions.
• Data Retention and Deletion. Institutions must be able to implement flexible and auditable retention policies and verify that data flagged for deletion has truly been purged from the system. Our platforms enable institutions to schedule and manage the removal of old or irrelevant information as required by data management best practices or applicable regulations.
Competition
We are fundamentally competing with the internal software development efforts of our potential customers.
Organizations frequently attempt to build their own data platforms before turning to buy ours. In trying to build something on their own, they generally rely on a patchwork of custom solutions, outside consultants, IT services companies, packaged enterprise and open source software, and significant internal IT resources.
In addition, our competitors include large enterprise software companies, government contractors, and system integrators. We also face competition from emerging companies as well as established companies that are only now beginning to enter this market.
The principal competitive factors in the markets in which we operate include:
• platform capabilities and product functionality;
• data security and privacy;
• ease and speed of adoption, use, and deployment;
• product innovation;
• pricing and cost structures;
• customer experience, including support; and
• brand awareness and reputation.
While we believe we generally compete favorably with our competitors, as well as with software developed by customers internally, based on these competitive factors, some of our competitors have greater name recognition, longer operating histories, and larger customer bases; larger sales and marketing budgets and resources and the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products; broader, deeper, or otherwise more established relationships with technology, channel, and distribution partners and customers; wider geographic presence or greater access to larger potential customer bases; greater focus in specific geographies; lower labor and research and development costs; larger and more mature intellectual property portfolios; and substantially greater financial, technical, and other resources to provide services, to make acquisitions, and to develop and introduce new products and capabilities.
Intellectual Property
We believe that our intellectual property rights are valuable and important to our business. We rely on a combination of patents, copyrights, trademarks, trade secrets, know-how, contractual provisions, and confidentiality procedures to protect our intellectual property rights.
We seek to protect our proprietary inventions relevant to our business through patent protection in the United States and abroad; however, we are not dependent on any particular patent or application for the operation of our business.
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In addition, we have registered “Palantir” as a trademark in the United States and other jurisdictions. We also have registered trademarks for “Gotham,” “Palantir Foundry,” and our corporate logo, and are the registered holder of a variety of domestic and international domain names that include “Palantir,” including, most importantly, “Palantir.com.”
In addition to the protection provided by our intellectual property rights, we enter into proprietary information and invention assignment agreements or similar agreements with our employees, consultants, and contractors. We further control the use of our proprietary technology and intellectual property rights through provisions in our agreements with customers.
Seasonality
We generally experience seasonality in the timing of recognition of revenue as a result of the timing of the execution of our contracts and, to a lesser extent, the existence of certain acceptance criteria, as we have historically executed many of our contracts in the third and fourth quarters due to the fiscal year ends and procurement cycles of our customers and at times we may start work prior to finalizing such contracts. See “Risk Factors—Seasonality may cause fluctuations in our results of operations and financial position.”
Employees and Human Capital
Our employees are critical to the success of our business. As of December 31, 2022, we had 3,838 full-time employees, including 1,436 employees employed outside of the United States. We also engage part-time employees, independent contractors, and third-party personnel to supplement our workforce.
Other than our employees in France, who are represented by a works council, none of our employees is represented by a labor union. We have not experienced any work stoppages due to employee disputes, and we believe that our employee relations are strong.
Our human capital resources objectives include recruiting, retaining, training, and motivating our personnel. We strive to foster a diverse and inclusive culture and environment which encourages active dialogue and robust engagement on the issues most salient to employee satisfaction and believe our employees are empowered to play a significant role in shaping the direction and success of the company. One avenue for employees to contribute their voices is through Affinity Groups: employee-led resource groups that celebrate unique perspectives and backgrounds and help guide our Diversity, Equity & Inclusion (“DEI”) business initiatives. We also conduct regular company-wide surveys to assess the sentiment toward our values and culture, and our employees’ well-being and overall health. These surveys allow Palantir to get actionable feedback and drive awareness, discussion, and change.
Diversity, Equity, & Inclusion
To achieve our best outcomes, Palantir needs people who bring a wide range of backgrounds, perspectives, and lived experiences. Our DEI team takes the lead in working to increase awareness and accountability and promote active allyship throughout Palantir. We acknowledge that each member of our increasingly diverse community has their own needs, experiences, and opportunities.
Available Information
Our website is https://www.palantir.com, our investor relations website is https://investors.palantir.com, our LinkedIn account is @Palantir Technologies and our Twitter account is @PalantirTech. We have used, and intend to continue to use, our website, investor relations website, LinkedIn, and Twitter accounts as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. The following filings are available for download free of charge through our investor relations website after we file them with the Securities and Exchange Commission (“SEC”): Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and our Proxy Statement for our Annual Meeting of Stockholders (“Proxy Statement”). The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website. Further corporate governance information, including our corporate governance guidelines, code of business conduct and ethics, and committee charters is also available on our investor relations website under the heading “Governance.” The contents of the websites provided above are not intended to be incorporated by reference into this Annual Report on Form 10-K
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or in any other report or document we file with the SEC. Further, our references to the URLs for these websites are intended to be inactive textual references only.