Palantir Operating Profit Jumps 239% as 93% Revenue Gain Quells ‘SaaSpocalypse’ Fears

‘AI sovereignty’ message helps drive 93% second-quarter revenue growth

‘Don’t hand your data to AI companies’

Palantir turns SaaSpocalypse fears into an opening

No client-data retention, support for closed environments

Marketing push helps win corporate trust

Palantir Technologies used its second-quarter earnings to push back against fears of a “SaaSpocalypse,” or the demise of software-as-a-service companies. Its argument that companies should retain control of their own data rather than hand it to artificial intelligence model developers appears to have resonated.

‘US commercial business is still in the early stages’

Palantir said on Aug. 3 that second-quarter revenue rose 93% from a year earlier to $1.935 billion, well above the $1.8 billion market forecast. US government revenue climbed 90% to $809 million, while US commercial revenue surged 149% to $764 million. Chief Executive Officer Alex Karp described the commercial business as “still in the very early stages of catching fire.”

Operating profit jumped 238.6% to $912 million. Adjusted operating margin, excluding one-time costs, rose to 62% from 46%. Software companies are generally considered to have strong growth and profitability when revenue growth plus operating margin exceeds 40%. Palantir posted 155%, topping Nvidia’s 153%.

“The results this quarter are from another world,” Karp said in describing growth that he said is expanding in speed and scale faster than ever. Palantir shares rose more than 14% in after-hours trading.

The earnings release could mark a turning point for a stock that has struggled since late last year. Palantir shares peaked at $207.18 in November and had fallen 39% as of Aug. 3. The data analytics company operates Gotham for government clients and Foundry for corporate customers. The platforms organize data held by governments and companies and help make it usable for AI.

The recent share decline followed concerns that new software could emerge to replace AI decision-making platforms like Palantir’s. Morningstar said last month that falling AI inference costs and improvements in large language models could lower barriers to entry in the AI decision software market that Palantir dominates.

Sovereignty argument may become a hurdle in Europe

Palantir has tried to turn corporate anxiety about AI into an opportunity. The company has effectively urged businesses that could be displaced by AI models not to surrender their data to AI firms. In a shareholder letter released the same day, Karp wrote that large language models and their developers, which have grown by absorbing nearly all of the documentary record produced by civilization, are now targeting industries around the world. He added that a growing push by companies to protect their data helped drive the second-quarter blowout.

Palantir has positioned itself as a data-processing company rather than a data-collection company. Its policy is not to collect or retain client data for training AI models. If customers use database management systems from Databricks or Snowflake, the data is processed within those systems. If a client has its own data center, Gotham and Foundry can also be installed in a closed environment isolated from external networks.

Some analysts say Palantir’s heavy emphasis on AI sovereignty could also constrain its overseas expansion. Governments in places such as the European Union could extend that logic and argue that national data should not be entrusted to a US software company like Palantir. France’s domestic intelligence agency, the Directorate-General for Internal Security, signed a data-processing contract last month with local company ChapsVision instead of Palantir. Political risk could also weigh on the company. Bloomberg reported that if Democrats win control of one or both chambers in the November US midterm elections, Palantir could face scrutiny because of its ties to the Donald Trump administration.

Kim In-yeop, Silicon Valley correspondent, Korea Economic Daily, inside@hankyung.com