Palantir Technologies Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current plans, expectations, and beliefs, involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. You should review the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and the section titled “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. 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 four principal software platforms, Gotham, Foundry, Apollo, and our Artificial Intelligence Platform (“AIP”). Foundry is our foundational data operations platform, which provides the core capabilities for data management, logic authoring, systemic mapping development through our Ontology, analytics, and workflow development. AIP is our generative AI platform, which provides secure connectivity to third-party-provided large language models (“LLMs”), a development toolchain for building AI-powered agents and automations, an array of AI-enabled end user applications, a broad evaluations framework for governing AI workflows in production, and more. Apollo is our continuous delivery platform, enabling the orchestration of upgrades of services and assets every day to manage the underlying infrastructure that hosts our other platforms. Gotham integrates with our other platforms, as well as our broader defense offerings, to power a wide array of missions across allied defense and intelligence 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. 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. 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 generative AI models, including 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. The Ontology has continuously evolved over time, serving as the heart of our platforms by activating data and analytics inside operations, enabling real-time connectivity between data, analytics, and operational teams, as well as AI. Ontology generally refers to the systematic mapping of data to meaningful context. The Palantir Ontology goes far beyond the traditional concept by integrating the elements of a decision—the data, logic, and actions—into a foundational representation of the organization, and allowing users to build interconnected workflows, turning specialized expertise into shared infrastructure to dynamically optimize decision-making across the enterprise. The Ontology can help create a shared understanding across all users in a data ecosystem regardless of technical skills, enabling organizations to scale more efficiently and rapidly. 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. Our approach with all our clients is to establish a partnership that transforms the way they use data in pursuit of their goals. We regularly evaluate partnerships and investment opportunities in complementary businesses, employee teams, technologies, and intellectual property rights in an effort to expand our product and service offerings. 22 Table of contents Our Business Our customers pay us to use the software platforms we have built. While we generally offer contract terms of one to five years in length, our customers sometimes enter into shorter-term contracts. Revenue is generally recognized ratably over the contract term. Many of our customer contracts contain termination for convenience provisions. For the three months ended June 30, 2026, we generated $1.9 billion in revenue, reflecting a 93% growth rate from the three months ended June 30, 2025 when we generated $1.0 billion in revenue. For the six months ended June 30, 2026, we generated $3.6 billion in revenue, reflecting a 89% growth rate from the six months ended June 30, 2025 when we generated $1.9 billion in revenue. In the three months ended June 30, 2026 and 2025, we generated income from operations of $912 million and $269 million, respectively, or adjusted income from operations of $1.2 billion and $0.5 billion, respectively, when excluding stock-based compensation and related employer payroll taxes. In the six months ended June 30, 2026 and 2025, we generated income from operations of $1.7 billion and $0.4 billion, respectively, or adjusted income from operations of $2.2 billion and $0.9 billion, respectively, when excluding stock-based compensation and related employer payroll taxes. In the three months ended June 30, 2026 and 2025, our gross profit was $1.6 billion and $0.8 billion, respectively, reflecting a gross margin of 85% and 81%, respectively, or 86% and 82%, respectively, when excluding stock-based compensation. In the six months ended June 30, 2026 and 2025, our gross profit was $3.1 billion and $1.5 billion, respectively, reflecting a gross margin of 86% and 81%, respectively, or 87% and 82%, respectively, when excluding stock-based compensation. For more information about our adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes; and gross profit and gross margin, when excluding stock-based compensation; as well as reconciliations from income from operations and gross profit, see the section titled “Non-GAAP Reconciliations” below . Our Customers We define a customer as an organization from which we have recognized revenue during the trailing twelve-month period. During the period ended June 30, 2026 and 2025, we had 1,049 and 849 customers, respectively, including companies in various commercial sectors and government agencies around the world. For large government agencies, where a single institution has multiple divisions, units, or subsidiary agencies, each such division, unit, or subsidiary agency that enters into a separate contract with us and is invoiced as a separate entity is treated as a separate customer. For example, while the U.S. Food and Drug Administration, Centers for Disease Control and Prevention, and National Institutes of Health are subsidiary agencies of the U.S. Department of Health and Human Services, we treat each of those agencies as a separate customer given that the governing structures and procurement processes of each agency are independent. We have built lasting and significant customer relationships and partnerships with some of the world’s leading government institutions and companies. Our average revenue for the top twenty customers during the trailing twelve months ended June 30, 2026 was $124 million, which grew 67% from an average of $75 million in revenue from the top twenty customers during the trailing twelve months ended June 30, 2025, demonstrating our expanding relationships with existing customers. Organizations in the commercial and government sectors face similar challenges when it comes to managing data, and we intend to expand our reach in both markets moving forward. 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 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. In the six months ended June 30, 2026, 52% of our revenue came from government customers and 48% came from commercial customers. Our U.S. customers have been a meaningful source of revenue growth for our business and, in recent periods, has represented an increasing portion of our total revenue. In the six months ended June 30, 2026, we generated 80% of our revenue from customers in the United States and the remaining 20% from non-U.S. customers. Revenue from our U.S. customers during the trailing twelve months ended June 30, 2026 was $4.8 billion, which grew 99% from the prior twelve-month period. We expect that U.S. customers will continue to be a source of significant revenue growth for us. We continue to believe that our government customers remain a meaningful source of revenue for our business, particularly during periods of economic uncertainty. However, large government customers, in particular, are generally subject to a number 23 Table of contents of uncertainties regarding budgets and spending levels, changes in timing and spending priorities, and regulatory and policy changes, which can make it difficult to predict when, or if, we will make sales to such customers or the size and scope of any contract awards. See also the discussion of “Risks Related to Relationships and Business with the Public Sector” within “ Item 1A. Risk Factors” included in this Quarterly Report on Form 10-Q. 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. 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. 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, geopolitical tensions, fluctuating interest rates, monetary policy changes, supply chain disruptions, geopolitical or economic uncertainty, foreign currency fluctuations, and the potential or actual imposition of tariffs or other impacts on trade relations. Additionally, these macroeconomic impacts have disrupted, and may continue to disrupt, the operations of our customers and prospective customers. In particular, if the portion of total revenue attributable to the United States remains at current levels or continues to increase, our business and financial condition could be more exposed to any future adverse conditions such as these in the United States. 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 Quarterly Report on Form 10-Q for further discussion of the impact of macroeconomic trends on our business. 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, Israel, and broader Middle East conflicts, including the escalation of hostilities resulting from the recent strikes by the United States and Israel on Iran and retaliatory strikes related thereto, and other global conflicts are still evolving and the outcomes remain highly uncertain, we do not expect that the 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. Our current operations related to Ukraine, Israel, and broader Middle East regions 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, 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. dollars. However, when the U.S. dollar strengthens compared to other currencies (primarily the Euro (“EUR”) and British pound sterling (“GBP”)), it 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 the U.S. dollar. Additionally, certain of our U.S. and non-U.S. subsidiaries may hold monetary assets and liabilities in currencies other than their functional currency (primarily the Japanese Yen (“JPY”), EUR, 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. dollar. For the six months ended June 30, 2026 such impacts were not material to our financial position or results of operations. 24 Table of contents Customer Impacts Macroeconomic conditions have impacted, and may continue to adversely impact, our customers’ businesses. With economic uncertainty, we may experience additional negative impacts on new customer acquisition, customer renewals, and customer collections, among other things, which could negatively impact our business and results of operations. Key Business Measure In addition to the measures presented in our condensed consolidated financial statements, we use the following key non-GAAP business measure to help us evaluate our business, identify trends affecting our business, formulate business plans and financial projections, and make strategic decisions. Contribution Margin We believe that the revenue we generate relative to the costs we incur in order to generate such revenue is an important measure of the efficiency of our business. We define contribution margin as revenue less our cost of revenue and sales and marketing expenses, excluding stock-based compensation, divided by revenue. Revenue is allocated to each customer account directly. The cost of revenue and sales and marketing costs include both the costs associated with the deployment and operation of our software as well as expenses associated with identifying new customers and expanding partnerships with existing ones. Our software engineers working with existing customers often manage the deployment and operation of our platforms as well as identify new ways that those platforms can be used. To calculate the contribution by segment, we allocate cost of revenue and sales and marketing expenses, excluding stock-based compensation, to an account pro rata based on headcount and time spent on the account during the period. To the extent certain costs or personnel are not directly assigned to a specific account, they are allocated pro rata based on total headcount staffed during such period. Direct costs, such as third-party cloud hosting services, are directly allocated to the account to which they relate. Allocated revenues and expenses are then aggregated into a segment based upon the customer account to which they relate. 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 customers or potential customers, including allocated overhead. 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. We have included contribution margin because it is a key measure used by our management to evaluate our performance, and we believe that it also provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team. Our calculation of contribution margin may differ from similarly titled measures, if any, reported by other companies. Contribution margin should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). For more information about contribution margin, including the limitations of this measure, and a reconciliation to income from operations, see the section titled “Non-GAAP Reconciliations” below. Non-GAAP Reconciliations We use the non-GAAP measures contribution margin; gross profit and gross margin, excluding stock-based compensation; 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 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. Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. 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 condensed consolidated statements of operations. Thus, our non-GAAP contribution margin; gross profit and gross margin, excluding stock-based compensation; and adjusted income from operations should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP. 25 Table of contents 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 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 The following table provides a reconciliation of contribution margin for the three and six months ended June 30, 2026 and 2025 (in thousands, except percentages): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Income from operations $ 912,004 $ 269,317 $ 1,666,002 $ 445,365 Add: Research and development expenses (1) 134,320 102,975 258,756 206,030 General and administrative expenses (1) 124,517 105,725 236,858 213,388 Total stock-based compensation expense 265,209 159,971 466,801 315,310 Total contribution $ 1,436,050 $ 637,988 $ 2,628,417 $ 1,180,093 Contribution margin 74 % 64 % 74 % 63 % ———— (1) Excludes stock-based compensation. Gross Profit and Gross Margin, Excluding Stock-Based Compensation The following table provides a reconciliation of gross profit and gross margin, excluding stock-based compensation for the three and six months ended June 30, 2026 and 2025 (in thousands, except percentages): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Gross profit $ 1,638,594 $ 810,763 $ 3,055,379 $ 1,521,648 Add: stock-based compensation 30,889 14,973 48,795 29,989 Gross profit, excluding stock-based compensation $ 1,669,483 $ 825,736 $ 3,104,174 $ 1,551,637 Gross margin, excluding stock-based compensation 86 % 82 % 87 % 82 % Adjusted Income from Operations and Adjusted Operating Margin The following table provides a reconciliation of adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes for the three and six months ended June 30, 2026 and 2025 (in thousands, except percentages): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Income from operations $ 912,004 $ 269,317 $ 1,666,002 $ 445,365 Add: stock-based compensation 265,209 159,971 466,801 315,310 Add: employer payroll taxes related to stock-based compensation 17,259 35,097 45,214 94,420 Adjusted income from operations $ 1,194,472 $ 464,385 $ 2,178,017 $ 855,095 Adjusted operating margin 62 % 46 % 61 % 45 % 26 Table of contents Components of Results of Operations Revenue We generate revenue from the sale of subscriptions to access our software platforms in our hosted environment along with ongoing operating and maintenance (“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 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. On-Premises Software Sales of our software licenses, primarily term licenses, grant customers the right to use functional intellectual property, either on their internal hardware infrastructure or on their own cloud instance, over the contractual term and are also sold together with stand-ready O&M services. O&M services include critical updates and support and maintenance services required to operate the software and, as such, are necessary for the software to maintain its intended utility over the contractual term. Because of this requirement, we have concluded that the software licenses 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. Professional services contracts typically include the provision of on-demand professional services for the duration of the contractual term, which may be coterminous or non-coterminous with a Palantir Cloud subscription or the On-Premises Software. Professional services are on-demand, whereby we perform services throughout the service period; therefore, the revenue is recognized over the related term. 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 subcontractor expenses, field-service representatives, third-party cloud hosting services, hardware costs, 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. Sales and Marketing 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, variable compensation, including commissions, and benefits for our sales force and personnel involved in sales functions, executing on pilots, and customer growth activities; as well as third-party cloud hosting services for our pilots, travel costs, and marketing and sales event-related costs. Sales and marketing costs are generally expensed as incurred. We expect that sales and marketing expenses will increase in absolute dollars and may vary from period to period 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 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. Research and development costs are expensed as incurred. 27 Table of contents We plan to continue to invest in personnel to support our research and development efforts. As a result, we expect that research and development expenses will increase in absolute dollars for the foreseeable future as we continue to invest to support these activities. General and Administrative 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. 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, U.S. Treasury securities, and restricted cash balances. Other Income (Expense), Net Other income (expense), net consists primarily of realized and unrealized gains and losses from equity securities and foreign currency exchange gains and losses. 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 Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests represents the share of income that is not attributable to the Company. Segments 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. Our operating segments are described below: • Commercial: This segment primarily serves customers working in non-government industries. • Government: This segment primarily serves customers that are U.S. government and non-U.S. government agencies. Segment profitability is evaluated based on contribution and contribution margin. Contribution is segment revenue less the related costs of revenue and sales and marketing expenses, excluding stock-based compensation expense. Contribution margin is contribution divided by revenue. 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 or are noncash costs. These noncash or unallocated costs include stock-based compensation expense, research and development costs, and general and administrative costs. 28 Table of contents Results of Operations The following table summarizes our condensed consolidated statements of operations data (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenue $ 1,935,464 $ 1,003,697 $ 3,568,047 $ 1,887,552 Cost of revenue 296,870 192,934 512,668 365,904 Gross profit 1,638,594 810,763 3,055,379 1,521,648 Operating expenses: Sales and marketing 339,500 243,788 658,720 480,097 Research and development 192,513 135,043 353,494 269,932 General and administrative 194,577 162,615 377,163 326,254 Total operating expenses 726,590 541,446 1,389,377 1,076,283 Income from operations 912,004 269,317 1,666,002 445,365 Interest income 77,505 56,255 143,899 106,696 Other income (expense), net 91,836 6,596 160,045 3,423 Income before provision for income taxes 1,081,345 332,168 1,969,946 555,484 Provision for income taxes 15,383 3,596 27,582 9,195 Net income 1,065,962 328,572 1,942,364 546,289 Less: Net income attributable to noncontrolling interests 4,072 1,845 9,947 5,531 Net income attributable to common stockholders $ 1,061,890 $ 326,727 $ 1,932,417 $ 540,758 The following table sets forth the components of our condensed consolidated statements of operations data as a percentage of revenue: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenue 100 % 100 % 100 % 100 % Cost of revenue 15 19 14 19 Gross margin 85 81 86 81 Operating expenses: Sales and marketing 18 24 18 26 Research and development 10 14 10 14 General and administrative 10 16 11 17 Total operating expenses 38 54 39 57 Income from operations 47 27 47 24 Interest income 4 5 4 5 Other income (expense), net 5 1 4 — Income before provision for income taxes 56 33 55 29 Provision for income taxes 1 — 1 — Net income 55 33 54 29 Less: Net income attributable to noncontrolling interests — — — — Net income attributable to common stockholders 55 % 33 % 54 % 29 % 29 Table of contents Comparison of the Three and Six Months Ended June 30, 2026 and 2025 Revenue Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 Amount % 2026 2025 Amount % Revenue: Government $ 990,032 $ 552,983 $ 437,049 79 % $ 1,848,442 $ 1,039,946 $ 808,496 78 % Commercial 945,432 450,714 494,718 110 % 1,719,605 847,606 871,999 103 % Total revenue $ 1,935,464 $ 1,003,697 $ 931,767 93 % $ 3,568,047 $ 1,887,552 $ 1,680,495 89 % Revenue increased by $932 million, or 93%, for the three months ended June 30, 2026 compared to the same period in 2025. Revenue from government customers increased by $437 million, or 79%, for the three months ended June 30, 2026 compared to the same period in 2025. Of the increase, $428 million was from government customers existing as of December 31, 2025. Revenue from U.S. government customers was $809 million for the three months ended June 30, 2026 compared to $426 million for the same period in 2025. Revenue from commercial customers increased by $495 million, or 110%, for the three months ended June 30, 2026 compared to the same period in 2025. Of the increase, $407 million was from commercial customers existing as of December 31, 2025. Revenue from U.S. commercial customers was $764 million for the three months ended June 30, 2026 compared to $306 million for the same period in 2025, a 149% increase. Revenue increased by $1.7 billion, or 89%, for the six months ended June 30, 2026 compared to the same period in 2025. Revenue from government customers increased by $808 million, or 78%, for the six months ended June 30, 2026 compared to the same period in 2025. Of the increase, $795 million was from government customers existing as of December 31, 2025. Revenue from U.S. government customers was $1.5 billion for the six months ended June 30, 2026 compared to $0.8 billion for the same period in 2025. Revenue from commercial customers increased by $872 million, or 103%, for the six months ended June 30, 2026 compared to the same period in 2025. Revenue from U.S. commercial customers was $1.4 billion for the six months ended June 30, 2026 compared to $0.6 billion for the same period in 2025, a 142% increase. Generally, increases in revenue from our existing customers are related to increased adoption of our products and services within their organizations. Cost of Revenue and Gross Profit Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 Amount % 2026 2025 Amount % Cost of revenue $ 296,870 $ 192,934 $ 103,936 54 % $ 512,668 $ 365,904 $ 146,764 40 % Gross profit $ 1,638,594 $ 810,763 $ 827,831 102 % $ 3,055,379 $ 1,521,648 $ 1,533,731 101 % Gross margin 85 % 81 % 4 % 86 % 81 % 5 % Cost of revenue for the three months ended June 30, 2026 increased by $104 million, or 54%, compared to the same period in 2025. The increase was primarily due to increases of $89 million in third-party cloud hosting services and $13 million in stock-based compensation and related expenses, partially offset by a decrease of $13 million in subcontractor expenses. Our gross margin for the three months ended June 30, 2026 and 2025 was 85% and 81%, respectively. Cost of revenue for the six months ended June 30, 2026 increased by $147 million, or 40%, compared to the same period in 2025. The increase was primarily due to increases of $128 million in third-party cloud hosting services and $16 million in payroll and other payroll-related costs, partially offset by a decrease of $19 million in subcontractor expenses. Our gross margin for the six months ended June 30, 2026 and 2025 was 86% and 81%, respectively. 30 Table of contents Operating Expenses Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 Amount % 2026 2025 Amount % Sales and marketing $ 339,500 $ 243,788 $ 95,712 39 % $ 658,720 $ 480,097 $ 178,623 37 % Research and development 192,513 135,043 57,470 43 % 353,494 269,932 83,562 31 % General and administrative 194,577 162,615 31,962 20 % 377,163 326,254 50,909 16 % Total operating expenses $ 726,590 $ 541,446 $ 185,144 34 % $ 1,389,377 $ 1,076,283 $ 313,094 29 % Sales and Marketing Sales and marketing expenses increased by $96 million, or 39%, for the three months ended June 30, 2026 compared to the same period in 2025. The increase was primarily due to increases of $43 million in stock-based compensation and related expenses and $22 million in payroll and other payroll-related costs. Sales and marketing expenses increased by $179 million, or 37%, for the six months ended June 30, 2026 compared to the same period in 2025. The increase was primarily due to increases of $58 million in stock-based compensation and related expenses, $43 million in payroll and other payroll-related costs, and $36 million in marketing expenses, Research and Development Research and development expenses increased by $57 million, or 43%, for the three months ended June 30, 2026 compared to the same period in 2025. The increase was primarily due to increases of $25 million third-party cloud hosting services and $20 million in stock-based compensation and related expenses. Research and development expenses increased by $84 million, or 31%, for the six months ended June 30, 2026 compared to the same period in 2025. The increase was primarily due to increases of $50 million in third-party cloud hosting services and $18 million in stock-based compensation and related expenses. General and Administrative General and administrative expenses increased by $32 million, or 20%, for the three months ended June 30, 2026 compared to the same period in 2025. The increase was primarily due to an $11 million in stock-based compensation and related expenses and $8 million in payroll and other payroll-related costs. General and administrative expenses increased by $51 million, or 16%, for the six months ended June 30, 2026 compared to the same period in 2025. The increase was primarily due to an increase of $17 million in stock-based compensation and related expenses and $12 million in payroll and other payroll-related costs. Stock-Based Compensation Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 Amount % 2026 2025 Amount % Cost of revenue $ 30,889 $ 14,973 $ 15,916 106 % $ 48,795 $ 29,989 $ 18,806 63 % Sales and marketing 106,067 56,040 50,027 89 % 182,963 108,553 74,410 69 % Research and development 58,193 32,068 26,125 81 % 94,738 63,902 30,836 48 % General and administrative 70,060 56,890 13,170 23 % 140,305 112,866 27,439 24 % Total stock-based compensation expense $ 265,209 $ 159,971 $ 105,238 66 % $ 466,801 $ 315,310 $ 151,491 48 % Stock-based compensation expenses increased by $105 million, or 66%, and $151 million, or 48%, for the three and six months ended June 30, 2026 compared to the same periods in 2025, respectively. The increase was driven by expense from new grants awarded since June 30, 2025, including restricted stock units (“RSUs”), performance-based RSUs (“P-RSUs”), and stock appreciation rights (“SARs”), partially offset by reductions in expense from equity awards that became fully vested and forfeitures. 31 Table of contents Interest Income Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 Amount 2026 2025 Amount Interest income $ 77,505 $ 56,255 $ 21,250 $ 143,899 $ 106,696 $ 37,203 Interest income increased by $21 million and $37 million for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 primarily due to an increase in our interest-bearing cash, cash equivalents, and investments in short-term U.S. Treasury securities. Other Income (Expense), Net Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 Amount 2026 2025 Amount Other income (expense), net $ 91,836 $ 6,596 $ 85,240 $ 160,045 $ 3,423 $ 156,622 Other income (expense), net changed by $85 million and $157 million for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 primarily due to a realized gain and upward adjustments on privately-held equity securities and net unrealized gains on publicly-traded equity securities. Provision for Income Taxes Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 Amount 2026 2025 Amount Provision for income taxes $ 15,383 $ 3,596 $ 11,787 $ 27,582 $ 9,195 $ 18,387 Provision for income taxes increased by $12 million and $18 million, respectively, for the three and six months ended June 30, 2026 compared to the same periods in 2025. The increases were primarily related to higher U.S. and foreign profits. For additional information see Note 10. Income Taxes in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Liquidity and Capital Resources As of June 30, 2026, our principal sources of liquidity were cash, cash equivalents, and short-term U.S. Treasury securities totaling $9.2 billion. We generated positive cash flow from operations for the six months ended June 30, 2026. We believe that we have sufficient liquidity to meet our operating requirements for at least the next twelve months and thereafter for the foreseeable future. We continue to evaluate our liquidity and capital resources, including our access to external capital, to ensure we can finance future capital requirements. The following table summarizes our cash flows for the periods indicated (in thousands): Six Months Ended June 30, 2026 2025 Net cash provided by (used in): Operating activities $ 2,115,332 $ 849,514 Investing activities (1,509,665) (2,007,287) Financing activities 8,378 (22,447) Effect of foreign exchange on cash, cash equivalents, and restricted cash (2,112) 11,518 Net increase (decrease) in cash, cash equivalents, and restricted cash $ 611,933 $ (1,168,702) 32 Table of contents Operating Activities Net cash provided by operating activities was $2.1 billion and $0.8 billion for the six months ended June 30, 2026 and 2025, respectively. The increase was primarily driven by revenue growth, partially offset by timing of billings to and payments from customers. Investing Activities Net cash used in investing activities was $1.5 billion and $2.0 billion for the six months ended June 30, 2026 and 2025, respectively. The decrease in cash used in investing activities was primarily due to a higher amount of proceeds from sales and redemptions of marketable securities offsetting increased purchases of short-term U.S. Treasury securities compared to prior year. Financing Activities Net cash provided by financing activities was $8 million for the six months ended June 30, 2026 and net cash used by financing activities was $22 million for the six months ended June 30, 2025. Financing cash inflows consisted primarily of proceeds from the exercise of common stock options. For the six months ended June 30, 2025, financing cash outflows were driven by taxes paid related to the net share settlement of SARs and repurchases of our Class A common stock. Material Cash Requirements Our contractual obligations and commitments primarily consist of operating lease commitments for our facilities and non-cancelable purchase commitments related to third-party cloud hosting services. Except as disclosed in Note 7. Commitments and Contingencies in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no additional material changes in our contractual obligations and commitments other than in the ordinary course of business since our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the Securities and Exchange Commission (“SEC”) on February 17, 2026. As of June 30, 2026, we had no outstanding debt balances and additional available and undrawn revolving commitments of $500 million under our credit facility. For more information, see Note 6. Debt in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Our future capital requirements will depend on many factors, including, but not limited to, the rate of our growth, our ability to attract and retain customers and their willingness and ability to pay for our products and services, and the timing and extent of spending to support our efforts to market and develop our products. Further, we may enter into future arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies. As such, we may seek additional equity or debt financing on an as needed or opportunistic basis. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. 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. Critical Accounting Policies and Estimates Our condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates discussed in the Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on February 17, 2026, except as described in Note 2. Significant Accounting Policies to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Recent Accounting Pronouncements For information on recently issued accounting pronouncements, if any, refer to Note 2. Significant Accounting Policies in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. 33 Table of contents