What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-20 compared with 2023-02-21 · 127 added, 145 removed, 371 unchanged (42% of the section changed)

10 unchanged sentences

We later began working with commercial enterprises, who often faced fundamentally similar challenges in working with data.

We have built three principal software platforms, Gotham, Foundry, and 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.

Foundry is becoming a central operating system not only for individual institutions but also for entire industries.

We have built four principal software platforms, Gotham, Foundry, Apollo, and our Artificial Intelligence Platform (“AIP”).

Gotham and Foundry enable institutions to transform massive amounts of information into an integrated data asset that reflects their operations, and AIP leverages the power of our existing machine learning technologies alongside large language models (“LLMs”) directly within Gotham and/or Foundry to help connect AI to enterprise data.

For over a decade, Gotham has surfaced insights for global defense agencies, the intelligence community, disaster relief organizations and beyond.

becoming a central operating system not only for individual institutions but also for entire industries.

Apollo, which we began offering as a commercial solution in 2021, 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.

Apollo allows our customers to run their software in virtually any environment.

While our focus in the short term remains on making our principal software platforms available to increasingly broad swaths of the market, we are also working to identify additional component parts and products embedded within those platforms that have potential as commercial offerings on their own.

In 2023, we began deploying our newest offering, AIP, which is designed for customers across the commercial and government sectors, enabling them to derive value from recent breakthroughs in artificial intelligence via the combination of our existing software platforms with LLMs.

We believe AIP uniquely allows users to connect LLMs and other AI with their data and operations to facilitate decision-making within the legal, ethical, and security constraints that they require.

While our focus in the short term remains on making our software platforms available to increasingly broad swaths of the market, we are also working to identify additional component parts and products embedded within those platforms that have potential as commercial offerings on their own.

We believe that every institution faces challenges that our platforms and products were designed to address.

6 unchanged sentences

For the year ended December 31, 2023, we generated $2.2 billion in revenue, reflecting a 17% growth rate from the year ended December 31, 2022, when we generated $1.9 billion in revenue.

In the year ended December 31, 2022, we incurred losses from operations of $161.2 million, or adjusted income from operations of $420.8 million when excluding stock-based compensation and related employer payroll taxes.

In the year ended December 31, 2023, we generated income from operations of $120.0 million, or adjusted income from operations of $632.8 million when excluding stock-based compensation and related employer payroll taxes.

In the year ended December 31, 2022, our losses from operations were $161.2 million, or adjusted income from operations of $420.8 million when excluding stock-based compensation and related employer payroll taxes.

3 unchanged sentences

and gross profit and gross margin, when excluding stock-based compensation;

as well as reconciliations from loss from operations and gross profit, see the section titled “Non-GAAP Reconciliations” below.

as well as reconciliations from income (loss) from operations and gross profit, see the section titled “Non-GAAP Reconciliations” below.

Our Customers

7 unchanged sentences

We have built lasting and significant customer relationships and partnerships with some of the world’s leading government institutions and companies.

As of December 31, 2022, we expect to generate revenue under our existing customer contracts for an additional 2.8 years on a dollar-weighted average contract duration basis.

Dollar-weighted average contract duration represents the length of time we expect to generate revenue on average, including existing contractual obligations and assuming that our customers will exercise all of the contractual options available to them, and is subject to change as we enter into new contracts or if customers terminate for convenience.

As of December 31, 2023, we expect to generate revenue from contracts closed during the year ended December 31, 2023 for an additional 3.4 years on a dollar-weighted average contract duration basis.

Dollar-weighted average contract duration represents the length of time we expect to generate revenue on average, based on the total potential lifetime length and value of contracts entered into with, or awarded by, our customers at the time of contract execution, presuming that our customers will exercise all of the contractual options available to them and no termination of contracts,

although the majority of our contracts are subject to termination provisions, including for convenience, and there can be no guarantee that contracts are not terminated or that contract options will be exercised.

We calculate this duration on a dollar-weighted basis to adjust for smaller deals.

3 unchanged sentences

Our decisions about which customer relationships require further investment may change over time, based on our assessment of the potential long-term value that our software can generate for them.

We enter into initial pilots with customers, generally at our own expense and without a guarantee of future returns, in order to access a unique set of opportunities that others may pass over for lack of resources and shorter investment horizons.

We conduct pilots and bootcamps with customers, generally at our own expense and without a guarantee of future returns, in order to access a unique set of opportunities that others may pass over for lack of resources and shorter investment horizons.

We manage customers at the account level, not by industry or sector, so that we can optimize on the specific growth opportunities for each customer.

14 unchanged sentences

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.

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.

2 unchanged sentences

Our contracts with our customers reflect that long-term orientation, often lasting for multiple years at a time.

Total remaining deal value is the total remaining value of contracts that have been awarded by our government and commercial customers and includes existing contractual obligations and unexercised contract options available to those customers.

Total remaining deal value presumes the exercise of all contract options and no termination of contracts;

Total remaining deal value is the total remaining value of contracts that have been entered into with, or awarded by, our customers as of the end of the reporting period.

Total remaining deal value presumes the exercise of all contract options available to our customers and no termination of contracts.

However, the majority of our contracts are subject to termination provisions, including for convenience, and there can be no guarantee that contracts are not terminated or that contract options will be exercised.

Total remaining deal value also includes remaining contract value from Strategic Commercial Contracts, which are subject to termination for cause provisions.

Total remaining deal value excludes all or some portion of the value of certain commercial contracts as a result of our ongoing assessments of customers’ financial condition, including the consideration of such customers’ ability and intention to pay, and whether such contracts continue to meet the criteria for revenue recognition, among other factors.

As of December 31, 2022, the total remaining deal value of the contracts, as defined above, was $3.7 billion, down 3% from December 31, 2021, when our total remaining deal value of such contracts was $3.8 billion.

Of our total remaining deal value, as of December 31, 2022, the total remaining deal value of the contracts that we entered into with commercial customers, including existing contractual obligations and available contractual options, as defined above, was $2.0 billion, down 23% from December 31, 2021, when the total remaining deal value of such contracts was $2.6 billion.

The decrease was due to the exclusion of certain contracts, as described above, as well as decreases resulting from the recognition of revenue and renegotiation of a commercial contract.

As of December 31, 2022, the total remaining deal value of the contracts that we had been awarded by government agencies in the United States and allied countries around the world, including existing contractual obligations and contractual options

available to those government agencies, was $1.7 billion, up 37% from December 31, 2021, when the total value of such contracts was $1.2 billion.

Further, total remaining deal value may exclude all or some portion of the value of certain commercial contracts as a result of our ongoing assessments of customers’ financial condition, including the consideration of such customers’ ability and intention to pay, and whether such contracts continue to meet the criteria for revenue recognition, among other factors.

As of December 31, 2023, the total remaining deal value of the contracts, as defined above, was $3.9 billion, up 5% from December 31, 2022, when our total remaining deal value of such contracts was $3.7 billion.

Of our total remaining deal value, as of December 31, 2023, the total remaining deal value of the contracts that we entered into with commercial customers, including existing contractual obligations and available contractual options, as defined above, was $2.1 billion, up 7% from December 31, 2022, when the total remaining deal value of such contracts was $2.0 billion.

As of December 31, 2023, the total remaining deal value of the contracts that we had been awarded by government agencies in the United States and allied countries around the world, including existing contractual obligations and contractual options available to those government agencies, was $1.8 billion, up 4% from December 31, 2022, when the total value of such contracts was $1.7 billion.

When calculating the total remaining deal value of government contracts, we do not include government contracts known as IDIQ contracts, totaling $4.1 billion, as of December 31, 2023, that we have been awarded, but where the funding of such contracts has not yet been determined.

5 unchanged sentences

Macroeconomic Trends

As a corporation with an international presence, we are subject to risks and uncertainties caused by significant events with macroeconomic impacts, including, but not limited to, the ongoing COVID-19 pandemic, the impact of the ongoing Russia-Ukraine conflict, rising inflation and interest rates, monetary policy changes, and foreign currency fluctuations.

Additionally, these macroeconomic impacts have generally disrupted the operations of our customers and prospective customers.

As a corporation with an international presence, we are subject to risks and uncertainties caused by significant events with macroeconomic impacts, including, but not limited to, geopolitical tensions, heightened interest rates, monetary policy changes, and foreign currency fluctuations.

Additionally, these macroeconomic impacts have disrupted, and may continue to disrupt, the operations of our customers and prospective customers.

We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results, as well as the overall global economy and geopolitical landscape.

See the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K for further discussion of the impact of macroeconomic trends on our business.

COVID-19 Impact

The COVID-19 pandemic continues to impact the global economy.

The extent to which COVID-19 may impact our financial conditions or results of operations in future periods remains uncertain, but to date has not had a material adverse impact on our results of operations.

We continue to prioritize the health and safety of our employees, our customers, and the communities in which we operate.

We have reopened our offices and have allowed business travel and in-person events to resume, while continuing to closely monitor developments around the evolving nature of the pandemic.

As such, our travel and office-related expenditures have increased, and may continue to increase moving forward.

However, we expect that some of our employees will continue to work remotely.

The economic effects of the pandemic and resulting societal changes are currently not predictable.

The COVID-19 pandemic has made clear to many of our customers that accommodating the extended timelines ordinarily required to realize results from implementing new software solutions is not an option during a crisis.

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.

Russia-Ukraine Conflict

We continue to closely monitor the impact of the ongoing Russia-Ukraine conflict and its global impacts on our business.

While the conflict is still evolving and the outcome remains highly uncertain, we do not expect that the Russian invasion will have a material impact on our business and results of operations.

We do not currently have office locations in Russia and none of our revenues came from sales to entities headquartered in Russia.

In June 2022, our Chief Executive Officer, Alexander Karp, met with the President of Ukraine and other senior officials to discuss opening an office in Ukraine and providing ongoing support.

Our current operations related to Ukraine are not material to our financial position or results of operations.

However, if the conflict continues or worsens, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.

Geopolitical Tensions

Our business operations are subject to interruption by events that are beyond our control, including geopolitical tensions.

We continue to closely monitor the impact of various geopolitical tensions and their global impacts on our business.

While the ongoing Russia-Ukraine and Israel conflicts are still evolving and the outcomes remain highly uncertain, we do not expect that resulting challenging macroeconomic conditions will have a material impact on our business or results of operations.

We do not currently have office locations in Russia or Palestinian territories and none of our revenues came from sales to entities headquartered in those countries or territories.

In 2023, we announced partnerships with Ukraine to support its defense and reconstruction efforts and investigations of potential war crimes, among other activities.

In 2024, we agreed to a strategic partnership with the Israeli Defense Ministry to supply technology to Israel to assist in the ongoing war.

However, our current operations related to Ukraine and Israel are not material to our financial position or results of operations.

If the respective conflicts continue or worsen, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.

Foreign Currency Exchange Rates

Exchange rates are subject to significant and rapid fluctuations due to a number of factors, including interest rate changes and political and economic uncertainty which may adversely affect our results of operations or financial position.

Our contracts with customers are primarily denominated in U.S.

As a result, the general strengthening of the U.S.

dollar relative to other major foreign currencies (primarily the Euro and GBP) had an unfavorable impact on our revenues from certain non-U.S.

however, that impact for the year ended December 31, 2022 was not material to our financial position or results of operations.

Exchange rates are subject to significant and rapid fluctuations due to a number of factors, including interest rate changes, monetary policy changes, and political and economic uncertainty which may adversely affect our results of operations or financial position.

Our contracts with customers and vendors are primarily denominated in U.S.

However, the general strengthening of the U.S.

dollar relative to other major foreign currencies (primarily the Euro and GBP) has had, and could in the future have, an unfavorable impact on our revenues and expenses from certain non-U.S.

customers or vendors whose contracts are denominated in currencies other than U.S.

Additionally, certain of our U.S.

subsidiaries may hold monetary assets and liabilities in currencies other than their functional currency (primarily the JPY, Euro, and GBP), which could subject our results of operations and cash flows to adverse fluctuations due to changes in such foreign currency exchange rates as compared to the U.S.

For the year ended December 31, 2023, such impacts were not material to our financial position or results of operations.

Customer Impacts

Current macroeconomic conditions may also adversely impact our customers’ business, particularly our early- and growth-stage customers.

Current macroeconomic conditions have impacted, and may continue to adversely impact, our customers’ businesses, particularly our early- and growth-stage customers.

Relationships with early- or growth-stage customers carry inherent risks because, among other things, such customers may be unable to generate sufficient revenues or profitability or to access any necessary financing or funding in a timely manner or on favorable terms to them in the current macroeconomic environment, which has impacted, and may continue to impact, our expected revenue and collections.

As a result, current macroeconomic conditions may continue to impact our ability to realize the full value of our commercial contracts with such early- or growth-stage customers.

As a result, current macroeconomic conditions have impacted, and may continue to impact, our ability to realize the full value of our commercial contracts with

such early- or growth-stage customers.

For additional information, see Note 4.

Investments and Fair Value Measurements in the consolidated financials statements included elsewhere in this Annual Report on Form 10-K.

Investments and Fair Value Measurements in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Key Business Measure

11 unchanged sentences

Contribution margin, both across our business and segments, is intended to capture how much we have earned from customers after accounting for the costs associated with deploying and operating our software, as well as any sales and marketing expenses involved in acquiring and expanding our partnerships with those customers, including allocated overhead.

We exclude stock-based compensation as it is a non-cash expense.

We exclude stock-based compensation as it is a noncash expense.

We believe that our contribution margin provides an important measure of the efficiency of our operations over time.

7 unchanged sentences

and adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes, to help us evaluate our business, identify trends affecting our business, formulate business plans and financial projections, and make strategic decisions.

We exclude stock-based compensation, which is a non-cash expense, from these non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance and provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team.

We exclude stock-based compensation, which is a noncash expense, from these non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance and provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team.

Additionally, we exclude employer payroll taxes related to stock-based compensation as it is difficult to predict and outside of our control.

1 unchanged sentence

In addition, other companies may not publish these or similar metrics.

Further, these metrics have certain limitations, as they do not include the impact of certain expenses that are reflected in our consolidated statement of operations.

Further, these metrics have certain limitations, as they do not include the impact of certain expenses that are reflected in our consolidated statements of operations.

Thus, our non-GAAP contribution margin;

2 unchanged sentences

We compensate for these limitations by providing reconciliations of these non-GAAP measures to the most comparable GAAP measures.

We encourage investors and others to review our business, results of operations, and financial information in its entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.

We encourage investors and others to review our business, results of operations, and financial information in their

entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.

Contribution Margin

1 unchanged sentence

Years Ended December 31,

Loss from operations $ (161,201) $ (411,046)

Income (loss) from operations $ 119,966 $ (161,201)

Research and development expenses (1)

16 unchanged sentences

Years Ended December 31,

Loss from operations $ (161,201) $ (411,046)

Income (loss) from operations $ 119,966 $ (161,201)

stock-based compensation 475,903 564,798

2 unchanged sentences

Components of Results of Operations

We generate revenue from the sale of subscriptions to access our software in our hosted environment along with ongoing O&M services (“Palantir Cloud”), software subscriptions in our customers’ environments with ongoing O&M services (“On-Premises Software”), and professional services.

We generate revenue from the sale of subscriptions to access our software platforms in our hosted environment along with ongoing O&M services (“Palantir Cloud”), software subscriptions in our customers’ environments with ongoing O&M services (“On-Premises Software”), and professional services.

Palantir Cloud

Our Palantir Cloud subscriptions grant customers the right to access the software functionality in a hosted environment controlled by Palantir and are sold together with stand-ready O&M services, as further described below.

We promise to provide continuous access to the hosted software throughout the contract term.

We agree to provide

continuous access to our hosted software throughout the contract term.

Revenue associated with Palantir Cloud subscriptions is generally recognized over the contract term on a ratable basis, which is consistent with the transfer of control of the Palantir services to the customer.

11 unchanged sentences

Cost of Revenue

Cost of revenue primarily includes salaries, stock-based compensation expense, and benefits for personnel involved in performing O&M and professional services, as well as field service representatives, third-party cloud hosting services, travel costs, allocated overhead, and other direct costs.

Cost of revenue primarily includes salaries, stock-based compensation expense, and benefits for personnel involved in performing O&M and professional services, as well as field-service representatives, third-party cloud hosting services, hardware costs, travel costs, allocated overhead, and other direct costs.

We expect that cost of revenue will increase in absolute dollars as our revenue grows and will vary from period to period as a percentage of revenue.

1 unchanged sentence

Our sales and marketing efforts span all stages of our sales cycle, including personnel involved with sales functions, and executing pilots at new or existing customers.

Sales and marketing costs primarily include salaries, stock-based compensation expense, and benefits for our sales force and personnel involved in sales functions, executing on pilots and customer growth activities;

Sales and marketing costs primarily include salaries, stock-based compensation expense, commissions, and benefits for our sales force and personnel involved in sales functions, executing on pilots, including bootcamps, and customer growth activities;

as well as third-party cloud hosting services for our pilots, marketing and sales event-related costs, travel costs, and allocated overhead.

Sales and marketing costs are generally expensed as incurred.

We expect that sales and marketing expenses will increase in absolute dollars as we continue to invest in our potential and current customers, in growing our business, sales force, and enhancing our brand awareness.

We expect that sales and marketing expenses will increase in absolute dollars as we continue to invest in our potential and current customers, in growing our business, in our sales force, and in enhancing our brand awareness.

Research and Development

Our research and development efforts are aimed at continuing to develop and refine our platforms, including adding new features and modules, increasing their functionality, and enhancing the usability of our platforms.

Research and development costs primarily include salaries, stock-based compensation expense, and benefits for personnel involved in performing the activities to develop and refine our platforms, internal use third-party cloud hosting services and other IT-related costs, travel costs, and allocated overhead.

Our research and development efforts are aimed at continuing to develop and refine our offerings, including adding new platforms, features, and modules, increasing their functionality, and enhancing the usability of our platforms.

Research and development costs primarily include salaries, stock-based compensation expense, and benefits for personnel involved in performing the activities to develop and refine our platforms and products, as well as third-party cloud hosting services and other IT-related costs, travel costs, and allocated overhead.

Research and development costs are expensed as incurred.

3 unchanged sentences

General and administrative costs include salaries, stock-based compensation expense, and benefits for personnel involved in our executive, finance, legal, human resources, and administrative functions, as well as third-party professional services and fees, travel costs, and allocated overhead.

We expect that general and administrative expenses will increase in absolute dollars as we hire additional personnel and enhance our systems, processes, and controls to support the growth in our business as well as our increased compliance and reporting requirements as a public company.

We expect that general and administrative expenses will increase in absolute dollars as we hire additional personnel and enhance our systems, processes, and controls to support the growth in our business as well as our continuing compliance and reporting requirements as a public company.

Interest Income

Interest income consists primarily of interest income earned on our cash, cash equivalents, and restricted cash balances.

Interest income consists primarily of interest income earned on our cash, cash equivalents, U.S.

treasury securities, and restricted cash balances.

Interest Expense

1 unchanged sentence

Other Income (Expense), Net

Other income (expense), net consists primarily of foreign currency exchange gains and losses, realized and unrealized losses from Investments, and our share of income and losses from our equity method investments.

Other income (expense), net consists primarily of foreign currency exchange gains and losses and realized and unrealized losses from equity securities.

The year ended December 31, 2022 also included a gain from a step acquisition.

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists of income taxes related to foreign and state jurisdictions in which we conduct business and withholding taxes.

Provision for Income Taxes

Provision for income taxes consists of income taxes related to foreign and state jurisdictions in which we conduct business and withholding taxes.

Net Income (Loss) Attributable to Noncontrolling Interests

Net income (loss) attributable to noncontrolling interests represents our joint venture partners’ proportionate share of the results of operations of the respective joint venture.

We have two operating segments, commercial and government, which were determined based on the manner in which the chief operating decision maker (“CODM”), who is our chief executive officer, manages our operations for purposes of allocating resources and evaluating performance.

Net income (loss) attributable to noncontrolling interests represents the share of income (loss) that is not attributable to the Company.

We have two operating segments, commercial and government, which were determined based on the manner in which the chief operating decision maker, who is our Chief Executive Officer, manages our operations for purposes of allocating resources and evaluating performance.

Various factors, including our organizational and management reporting structure and customer type, were considered in determining these operating segments.

10 unchanged sentences

To the extent costs of revenue or sales and marketing expenses are not directly attributable to a particular segment, they are allocated based upon headcount at each operating segment during the period.

We use it, in part, to evaluate the performance of, and allocate resources to, each of our operating segments, which excludes certain operating expenses that are not allocated to operating segments because they are separately managed at the consolidated corporate level.

These unallocated costs include stock-based compensation expense, research and development costs, and general and administrative costs, such as legal and accounting.

These unallocated or noncash costs include stock-based compensation expense, research and development costs, and general and administrative costs, such as legal and accounting costs.

Results of Operations

14 unchanged sentences

Total operating expenses 1,673,941 1,658,523 1,613,531

Loss from operations (161,201) (411,046) (1,173,679)

Income (loss) from operations 119,966 (161,201) (411,046)

Interest income 132,572 20,309 1,607

1 unchanged sentence

Other income (expense), net (11,977) (216,077) (75,415)

Loss before provision for (benefit from) income taxes (361,027) (488,494) (1,179,027)

Provision for (benefit from) income taxes 10,067 31,885 (12,636)

Net loss (371,094) (520,379) (1,166,391)

Income (loss) before provision for income taxes 237,091 (361,027) (488,494)

Provision for income taxes 19,716 10,067 31,885

Net income (loss) 217,375 (371,094) (520,379)

Net income attributable to noncontrolling interests 7,550 2,611 —

Net loss attributable to common stockholders $ (373,705) $ (520,379) $ (1,166,391)

(1) Includes stock-based compensation expense as follows (in thousands):

Years Ended December 31,

2022 2021 2020

Cost of revenue $ 44,061 $ 68,546 $ 139,627

Sales and marketing 196,301 242,910 398,205

Research and development 93,871 150,298 357,063

General and administrative 230,565 316,461 375,807

Total stock-based compensation expense (i)

$ 564,798 $ 778,215 $ 1,270,702

(i) On September 30, 2020, in connection with our Direct Listing, we incurred $769.5 million and $8.4 million of stock-based compensation using the accelerated attribution method related to the satisfaction of the performance-based vesting condition for RSUs and growth units, respectively, that had satisfied the service-based vesting condition as of such date.

Net income (loss) attributable to common stockholders $ 209,825 $ (373,705) $ (520,379)

The following table sets forth the components of our consolidated statements of operations data as a percentage of revenue:

3 unchanged sentences

Cost of revenue 19 21 22

Gross profit 79 78 68

Gross margin 81 79 78

Operating expenses:

3 unchanged sentences

Total operating expenses 76 87 105

Loss from operations (8) (27) (107)

Income (loss) from operations 5 (8) (27)

Interest income 6 1 —

1 unchanged sentence

Other income (expense), net — (12) (5)

Loss before provision for (benefit from) income taxes (19) (32) (108)

Provision for (benefit from) income taxes 1 2 (1)

Net loss (20) (34) (107)

Income (loss) before provision for income taxes 11 (19) (32)

Provision for income taxes 1 1 2

Net income (loss) 10 (20) (34)

Net income attributable to noncontrolling interests 1 — —

Net loss attributable to common stockholders (20) % (34) % (107) %

Net income (loss) attributable to common stockholders 9 % (20) % (34) %

Comparison of the Years Ended December 31, 2023 and 2022

5 unchanged sentences

Revenue increased by $319.1 million, or 17%, for the year ended December 31, 2023 compared to 2022.

Revenue from government customers increased by $174.4 million, or 19%, for the year ended December 31, 2022 compared to 2021, primarily from customers in the United States.

Revenue growth slowed compared to the prior year as a result of increased delays in the completion of the U.S.

government budgeting process when compared to their budgeting process in the prior year.

Of the increase, $151.1 million was from government customers existing as of December 31, 2021.

Revenue from government customers increased by $150.4 million, or 14%, for the year ended December 31, 2023 compared to 2022.

Of the increase, $129.4 million was from existing government customers as of December 31, 2022.

Generally, increases in revenue from our existing customers are a result of expanded use of our products and services within their organizations.

2 unchanged sentences

Revenue from commercial customers increased by $168.7 million, or 20%, for the year ended December 31, 2023 compared to 2022.

Of the increase, $96.8 million was from new customers as of December 31, 2021, of which $27.0 million was revenue from customers with which we had entered into concurrent Investment Agreements.

Of the increase, $79.6 million was from existing customers as of December 31, 2022, which included an offsetting decrease of $31.1 million of revenue from Strategic Commercial Contracts.

Investments and Fair Value Measurements in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

Revenue from U.S.

commercial customers was $457.1 million for the year ended December 31, 2023 compared to $335.1 million for the same period in 2022.

Cost of Revenue and Gross Profit

5 unchanged sentences

Cost of revenue for the year ended December 31, 2023 increased by $22.6 million, or 6%, compared to 2022.

The increase was primarily due to increases of $33.0 million in third-party cloud hosting services driven by increased usage from customer growth and expansion, $29.4 million in field service representatives mainly related to new projects, $18.1 million in payroll and other payroll-related costs as a result of increased headcount attributable to our cost of revenue function, and $11.9 million in travel and office-related costs.

The increases were partially offset by a decrease of $31.0 million in stock-based compensation expense and related expenses.

The increase was primarily due to increases of $12.2 million in third-party cloud hosting services and other IT costs driven by usage from customer growth and expansion, $9.4 million in payroll and other payroll-related costs as a result of higher average headcount during the year, and $7.5 million in field service representatives, hardware, and other direct costs generally related to new or expanded projects.

The increases were partially offset by a decrease of $5.9 million in stock-based compensation expense and related expenses, net.

For additional information, see the section titled “Stock-Based Compensation” below.

Our gross margin for the year ended December 31, 2022 increased by 1% compared to 2021.

Gross margin increased as a result of revenue growth outpacing costs of revenue.

The primary cause of this growth rate variation was the decrease in stock-based compensation expense and related expenses in cost of revenue relative to total expense growth as compared to the prior year.

Our gross margin for the year ended December 31, 2023 increased by 2% compared to 2022, as revenue growth outpaced costs of revenue.

The primary cause of this growth rate variation was the decrease in stock-based compensation expense and related expenses, net in cost of revenue and smaller growth in field service representatives and other direct costs relative to revenue growth as compared to the prior year.

Operating Expenses

7 unchanged sentences

Sales and marketing expenses increased by $42.5 million, or 6%, for the year ended December 31, 2023 compared to 2022.

The increase was primarily due to increases of $93.1 million in payroll and other payroll-related costs driven by increased headcount attributable to our sales and marketing function, $36.3 million in travel and office-related costs, and $23.5 million in marketing and advertising expenses.

The increases were partially offset by a decrease of $81.3 million in stock-based compensation expense and related expenses.

The increase was primarily due to increases of $53.6 million in payroll and other payroll-related costs driven by higher average headcount, $20.2 million in travel and office-related costs, and $10.2 million in professional services.

The increases were

partially offset by a decrease of $26.2 million in stock-based compensation expense and related expenses, net.

For additional information, see the section titled “Stock-Based Compensation” below.

Research and Development

Research and development expenses decreased by $27.8 million, or 7%, for the year ended December 31, 2022 compared to 2021.

The decrease was primarily due to a decrease of $75.1 million in stock-based compensation expense and related expenses.

Research and development expenses increased by $44.9 million, or 12%, for the year ended December 31, 2023 compared to 2022.

The increase was primarily due to increases of $17.2 million in payroll and other payroll-related costs driven by higher average headcount, $9.6 million in third-party cloud hosting services and other IT costs, and $9.2 million in stock-based compensation expense and related expenses.

For additional information, see the section titled “Stock-Based Compensation” below.

The decrease was partially offset by increases of $22.8 million in payroll and other payroll-related costs driven by increased headcount attributable to our research and development function, $12.0 million in travel and office-related costs, and $11.6 million in third-party cloud hosting services and other IT costs driven by increased usage to support customer growth and expansion, as well as other IT costs to support company growth.

General and Administrative

General and administrative expenses decreased by $72.0 million, or 12%, for the year ended December 31, 2023 compared to 2022.

The decrease was primarily due to a decrease of $113.0 million in stock-based compensation expense and related expenses.

The decrease was primarily due to decreases of $46.2 million in stock-based compensation expense and related expenses, net, $17.9 million in professional services, and $11.3 million in travel costs.

This decrease was partially offset by an increase of $15.0 million in payroll and other payroll-related costs driven by higher average headcount.

For additional information see the section titled “Stock-Based Compensation” below.

This decrease was partially offset by increases of $34.1 million in travel and office-related costs, $28.9 million in payroll and other payroll-related costs driven by increased headcount attributable to our general and administrative functions, $15.0 million in professional service fees mainly related to legal and financial services, and a $10.1 million allowance for credit losses.

Stock-Based Compensation

7 unchanged sentences

Stock-based compensation expenses decreased by $88.9 million, or 16%, for the year ended December 31, 2023 compared to 2022.

The decrease was primarily driven by forfeitures and lower expense under the accelerated attribution method for RSUs granted prior to September 30, 2020, the date of our Direct Listing, during the year ended December 31, 2022 compared to the same period in 2021, partially offset by an increase related to awards granted after December 31, 2021.

The decrease was primarily driven by lower expense under the accelerated attribution method for RSUs granted prior to our Direct Listing, during the year ended December 31, 2023 compared to the same period in 2022.

Additionally, stock-based compensation expenses decreased due to the cancellation and vesting of options and RSUs during the year.

Interest Income

2 unchanged sentences

Interest income $ 132,572 $ 20,309 $ 112,263

Interest income increased by $18.7 million for the year ended December 31, 2022 compared to 2021 primarily due to an increase in U.S.

interest rates on interest earned from our cash, cash equivalents, and restricted cash.

Interest income increased by $112.3 million for the year ended December 31, 2023 compared to 2022 primarily due to higher U.S.

interest rates and increases in our interest-bearing cash and cash equivalents, and our investments in short-term U.S.

treasury securities.

Interest Expense

2 unchanged sentences

Interest expense $ (3,470) $ (4,058) $ 588

Interest expense increased by $0.4 million for the year ended December 31, 2022 compared to 2021 driven by the amendments to our credit facility during the year.

There was no material change in interest expense for the year ended December 31, 2023 compared to 2022.

Other Income (Expense), Net

2 unchanged sentences

Other income (expense), net $ (11,977) $ (216,077) $ 204,100

Other income (expense), net changed by $140.7 million for the year ended December 31, 2022 compared to 2021 primarily due to $272.1 million of net unrealized and realized losses from our investments in marketable securities, partially offset by a $44.3 million gain from a “step acquisition” (as defined by U.S.

Other income (expense), net changed by $204.1 million for the year ended December 31, 2023 compared to 2022 primarily due to the net decrease in unrealized losses from our shares held in equity securities, partially offset by an increase in net realized losses from sales of publicly-traded equity securities, and $44.3 million gain from a “step acquisition” (as defined by U.S.

GAAP) that was reported in 2022.

For additional information see Note 4.

5 unchanged sentences

Provision for income taxes $ 19,716 $ 10,067 $ 9,649

Provision for income taxes decreased by $21.8 million for the year ended December 31, 2022 compared to 2021 primarily due to the prior year establishment of a full valuation allowance against its U.K.

deferred tax assets during the fourth quarter of 2021 partially offset by permanent differences associated with U.S.

Base Erosion and Anti Abuse Tax elections.

Provision for income taxes increased by $9.6 million for the year ended December 31, 2023 compared to 2022 primarily due to the increase in foreign income taxes as the result of higher foreign taxable income and higher foreign withholding taxes in the current year.

The Company maintains a full valuation allowance against its U.S.

federal and state and U.K.

deferred tax assets.

federal and state, and certain foreign deferred tax assets.

For additional information see Note 11.

1 unchanged sentence

Liquidity and Capital Resources

We generated positive cash flow from operations for the year ended December 31, 2022 and had $2.6 billion in cash and cash equivalents available as of December 31, 2022.

We believe that cash flows generated from operations, cash, cash equivalents, available funds and access to financing sources, including our credit facility, will be sufficient to meet our anticipated operating cash needs for at least the next twelve months.

We generated positive cash flow from operations for the year ended December 31, 2023.

We had cash, cash equivalents, and short-term U.S.

treasury securities totaling $3.7 billion available as of December 31, 2023.

We believe that cash flows generated from operations, cash, cash equivalents, marketable securities, available funds, and access to financing sources, including our credit facility, will be sufficient to meet our anticipated operating cash needs for at least the next twelve months.

However, any projections of future cash needs and cash flows are subject to substantial uncertainty.

We have generated significant losses from our operations as reflected in our consolidated balance sheets and we expect cash flow from operations may fluctuate for the foreseeable future.

Historically, we have financed our operations primarily through the sale of our equity securities, including proceeds from option exercises, and payments received from our customers.

As of December 31, 2022, our accumulated deficit balance was $5.9 billion, and our principal sources of liquidity were $2.6 billion of cash and cash equivalents.

During April 2021, we repaid our outstanding term loans of $200.0 million.

As of December 31, 2022, we had no outstanding debt balances and additional available and undrawn revolving and DDTL commitments of $950.0 million under our credit agreement to fund working capital and general corporate expenditures.

No amounts were drawn as of the date of this Annual Report on Form 10-K.

We have historically generated significant losses from our operations as reflected in our consolidated balance sheets and while we have generated income from operations and positive cash flows from operations in the year ended December 31, 2023, the amounts may fluctuate for the foreseeable future.

As of December 31, 2023, our accumulated deficit balance was $5.6 billion, and our principal sources of liquidity were cash, cash equivalents, and short-term U.S.

treasury securities totaling $3.7 billion.

As of December 31, 2023, we had no outstanding debt balances and additional available and undrawn revolving commitments of $500.0 million under our credit facility.

For more information, see Note 6.

2 unchanged sentences

Further, we may enter into future arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies;

additionally, we may repurchase shares of our Class A common stock from time to time under our Share Repurchase Program.

As such, we may be required to seek additional equity or debt financing.

1 unchanged sentence

If additional funds are not available to us on acceptable terms, or at all, our business, financial condition, and results of operations could be adversely affected.

For additional information on our Share Repurchase Program, see Note 9.

Stockholders’ Equity in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

The following table summarizes our cash flows for the periods indicated (in thousands):

11 unchanged sentences

Net cash provided by operating activities was $712.2 million and $223.7 million for the year ended December 31, 2023 and 2022, respectively.

The decrease was primarily driven by timing of payments to vendors and timing of the receipt of payments from our customers.

The increase was primarily driven by timing of payments to vendors and timing of the receipt of payments from our customers, as well as an increase in interest income.

Investing Activities

Net cash used in investing activities was $45.4 million and $397.9 million for the year ended December 31, 2022 and 2021, respectively.

The decrease in cash used in investing activities was primarily due to a reduction of our purchases of alternative investments and marketable securities, as well as increases from cash acquired from business combinations and sales or redemption of certain marketable securities.

Net cash used in investing activities was $2.7 billion and $45.4 million for the year ended December 31, 2023 and 2022, respectively.

The increase in cash used in investing activities was primarily due to purchases of marketable securities, primarily comprised of short-term U.S.

treasury securities, offset by proceeds from sales and redemptions of marketable securities.

Financing Activities

Net cash provided by financing activities was $86.0 million and $306.7 million for the year ended December 31, 2022 and 2021, respectively.

The decrease in cash provided by financing activities was driven by a decrease in proceeds from the exercise of common stock options, partially offset by the principal repayments on borrowings of $200.0 million made during the year ended December 31, 2021.

Net cash provided by financing activities was $218.8 million and $86.0 million for the year ended December 31, 2023 and 2022, respectively, each of which primarily consisted of proceeds from the exercise of common stock options.

Contractual Obligations and Commitments

37 unchanged sentences

Revenue Recognition

We generate revenue from the sale of subscriptions to access our software Palantir Cloud and On-Premises Software, with ongoing O&M services and professional services.

We generate revenue from the sale of subscriptions to access our software platforms via Palantir Cloud and On-Premises Software, with ongoing O&M services and professional services.

In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers , we recognized revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for promised goods or services.

8 unchanged sentences

Our Palantir Cloud subscriptions grant customers the right to access the software functionality in a hosted environment controlled by Palantir and are also sold together with stand-ready O&M services.

We promise to provide continuous access to the hosted software throughout the contract term.

We agree to provide continuous access to our hosted software platforms throughout the contract term.

2 unchanged sentences

The O&M services include critical updates, support, and maintenance services required to operate our software and, as such, are necessary for our software to maintain its intended utility over the contractual term.

Because of this requirement, we have concluded that the software subscriptions and O&M services, which together we refer to as our On-Premises Software, are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract.

Because of this requirement, we

have concluded that the software subscriptions and O&M services, which together we refer to as our On-Premises Software, are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract.

Revenue is generally recognized over the contract term on a ratable basis.

Professional Services

Our professional services support the customers’ use of the software and include, as needed, on-demand user support, user-interface configuration, training, and ongoing ontology and data modeling support.

Our professional services support the customers’ use of the software platforms and include, as needed, on-demand user support, user-interface configuration, training, and ongoing ontology and data modeling support.

Professional services contracts typically include the provision of on-demand professional services for the duration of the contractual term.

3 unchanged sentences

Contract Liabilities

The timing of customer billing and payment relative to the start of the service period varies from contract to contract;

The timing of customer billings and payments relative to the start of the service period varies from contract to contract;

however, we bill many of our customers in advance of the provision of services under our contracts, resulting in contract liabilities consisting of either deferred revenue or customer deposits.

5 unchanged sentences

however, our terms generally require payment within 30 to 60 days from the invoice date.

In instances where the timing of revenue recognition differs from the timing of payment, we elected to apply

the practical expedient in accordance with ASC 606 to not adjust contract consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when promised goods and services are transferred to the customer and when the customer pays for those goods and services will be one year or less.

In instances where the timing of revenue recognition differs from the timing of payment, we elected to apply the practical expedient in accordance with ASC 606 to not adjust contract consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when promised goods and services are transferred to the customer and when the customer pays for those goods and services will be one year or less.

As such, we determined our contracts do not generally contain a significant financing component.

3 unchanged sentences

We concluded that the promise to provide a software subscription is highly interdependent and interrelated with the promise to provide O&M services and such promises are not distinct within the context of our contracts and are accounted for as a single performance obligation for our On-Premises Software.

Additionally, the pricing of our contracts is generally fixed;

however, it is possible for contracts to include variable consideration, which can be based on subjective or objective criteria.

We include the estimated amount of variable consideration that we expect to receive to the extent it is probable that a significant revenue reversal will not occur.

Variable consideration received was not material in the periods presented.

Significant estimates and assumptions are used in the identification of performance obligations in customer contracts and collectability of contract consideration, including accounts receivable.

Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that management believes to be reasonable under the circumstances.

Actual results could differ from those estimates and such differences could affect our financial position and results of operations.

Recent Accounting Pronouncements

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis