Palantir just reported Q3 2026, and it is growing faster at about $9.3 billion in run-rate than it was at $4 billion. Revenue grew 96% year-over-year and 20% quarter-over-quarter to $2.313 billion, and quarterly revenue surpassed $2 billion for the first time ever.
The stock went down anyway. Palantir traded at $172.99 after the print, down from $178.30 just before earnings. The reason is in the bookings numbers, covered in #3 below.
1. U.S. Commercial Hit $984 Million and Passed U.S. Government for the First Time
For 20 years, Palantir was a government company that also sold to enterprises. That flipped this quarter. U.S. commercial revenue grew 148% year-over-year and 29% quarter-over-quarter to $984 million, while U.S. government revenue grew 96% year-over-year and 18% quarter-over-quarter to $953 million.
U.S. commercial was $764 million in Q2, so it added about $220 million of quarterly revenue in 90 days. A year ago, the entire U.S. commercial segment did $397 million in a quarter. One quarter’s increase was more than half of what the whole segment did a year ago.
Government is not slowing down to let it happen. Government growing 96% is now the slower half of the business.
Karp’s line on it: “our sequential growth in U.S. commercial of 29% would be an astonishing annual growth rate of any public software company in America.” Most public B2B companies would take 29% a year.
The founder decision: Palantir took years of criticism for pushing into commercial when government was the proven money. AIP bootcamps and the commercial sales buildout were expensive for a long time. The second market is now bigger than the first. If you have a second segment compounding faster than your core, move your best people onto it before the numbers make it obvious.
2. 686 U.S. Commercial Customers Are Doing ~$5.7 Million a Year Each, and NRR Hit 165%
Palantir still has a very small customer count for its revenue.
U.S. commercial customers rose 29% YoY to 686 while average trailing 12-month revenue per U.S. commercial customer grew 88% YoY, and company-wide net dollar retention rose 800 basis points QoQ to 165%.
$984 million in a quarter across 686 customers is about $1.43 million per customer per quarter, or roughly $5.7 million annualized. Customers grew 29%. Revenue grew 148%. Nearly all of the growth is existing customers buying more.
NRR is also rising at scale: 134% a year ago, 157% last quarter, 165% now. At most companies NRR declines as they get bigger.
Two expansion examples from the call:
- A global appliance company converted a $1 million pilot begun in Q2 2026 into a $3 million ACV deal that quarter, then expanded it to $15 million in Q3.
- An industrial materials company moved from a nearly $3 million pilot in Q2 FY 2026 to a $29 million ACV deal in Q3.
That second one went from $3 million to $29 million in about 90 days.
The founder decision: Palantir lands with a paid pilot that has to show value fast, then expands aggressively once it does. It does not chase logo count. At 110% NRR, new logos are your main growth lever. At 165%, each good customer drives its own growth.
3. Bookings Went Flat: TCV Up Only 6%, U.S. Commercial TCV Down 31% Sequentially
This is why the stock fell.
Palantir closed TCV of $2.918 billion, up 6% year-over-year, including $1.463 billion of U.S. commercial TCV, up 11% year-over-year. U.S. commercial RDV was $6.517 billion, up 79% year-over-year and 4% quarter-over-quarter. Total RPO was $4.9 billion, up 88% year-over-year but flat sequentially.
In Q2, Palantir closed $2.132 billion in U.S. commercial TCV, up 153% year over year and 81% sequentially. So U.S. commercial TCV went from $2.13 billion to $1.46 billion in one quarter, while revenue grew 148%.
Palantir attributes the gap to contract length. CFO Dave Glazer flagged that the new eight-figure contracts are shorter in duration than in prior periods, which helps explain the gap between 96% revenue growth and 6% TCV growth. Management expects deal durations and sizes to expand as customers begin harvesting value from their deployments.
Two numbers support that read: 165% NRR, and billings of $2.39 billion, up 114% year on year. The risk is that shorter contracts give customers more points to leave.
The founder decision: Palantir traded contract length for speed of close. That accelerates revenue and makes backlog look weaker. If you make the same trade, expect TCV and RPO to look bad for a few quarters, and expect investors to judge you on whether renewals and expansions actually come in. For Palantir, that test is Q4 and Q1.
4. 62% Adjusted Operating Margin and $1.13 Billion of GAAP Net Income While Growing 96%
Adjusted income from operations was $1.427 billion, a 62% adjusted operating margin compared with 51% a year earlier. Add 96% growth and the Rule of 40 score is 158. The benchmark is 40.
The GAAP numbers hold up too. GAAP income from operations was $1.085 billion, a 47% margin, and GAAP net income was $1.128 billion, a 49% margin. Stock-based compensation was $319 million in Q3, about 14% of revenue, well below most high-growth B2B companies.
Expenses are growing at about half the rate of revenue. Non-GAAP adjusted expense rose 53% year over year to $887 million. Revenue grew 96%.
That is a deliberate choice, because management said internal capacity falls short of demand.
The founder decision: When demand outruns capacity, most CEOs hire as fast as they can. Palantir held expense growth to about half of revenue growth and relies on AIP and the ontology to carry more of each deployment. If your AI product needs a proportional team of forward-deployed engineers for every new customer, these margins are out of reach.
5. International Commercial Grew Just 1% Sequentially. Palantir Is a U.S. Company Now.
International commercial revenue was up 21% YoY but just 1% QoQ to $184 million, and international government revenue was up 31% YoY to $192 million.
U.S. revenue was $1.937 billion of $2.313 billion, or 84% of the business. U.S. commercial grew 29% sequentially. International commercial grew 1%.
Palantir has said for years that Europe adopts more slowly, and it is not forcing it. Resources are going where buyers are signing now.
The founder decision: When one market grows 29% a quarter and another grows 1%, don’t split resources evenly to look global. Put them into the market that’s growing. Palantir is capacity-constrained in the U.S., so international stays a lower priority until that changes.
And 5 More Interesting Learnings
- Q4 guide implies another 15% sequential increase. Palantir forecast Q4 revenue of $2.649 bn to $2.653 bn and raised full-year 2026 revenue guidance to $8.530 bn to $8.534 bn, up from $8.15 billion one quarter ago.
- Free cash flow margin dipped to 53%. Adjusted free cash flow was $1.216 billion, representing a 53% margin, down from 63% in Q2. FCF guidance was raised to $4.8 billion to $5 billion from $4.5 billion to $4.7 billion.
- Fewer $10M+ deals than last quarter. Palantir closed 212 deals of at least $1 million, 107 deals of at least $5 million, and 64 deals of at least $10 million. That’s 64 $10M+ deals vs. 73 in Q2, and up from 53 a year ago.
- Gross margin slipped 130 basis points. GAAP gross margin eased to 83.4% in Q3 from 84.7% in Q2, likely reflecting higher compute costs.
- Karp is selling sovereignty, not models. Karp has publicly backed open-weight models and criticized the major AI labs, saying they force enterprises to give up their data sovereignty. Palantir’s pitch is that the customer owns the tuned model and the workflow, and the LLM underneath can be swapped.
Palantir at $2.3 Billion a Quarter: What Q4 Has to Prove
The operating business is exceptional: 96% growth, 165% NRR, 49% GAAP net margin, and $10.4 billion in cash, cash equivalents, and U.S. Treasury securities. The weak spot is bookings, with TCV up 6% and U.S. commercial RDV up 4% sequentially. At a $428.6 billion market cap, about 46x run-rate, investors want evidence that the shorter contracts renew at larger sizes. The pilot conversions to $15 million and $29 million suggest they will, and Q4 and Q1 TCV will confirm it or not.
