Palantir Technologies Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 5, 2024

Key Takeaways

  • Driven by AIP and bootcamps, US commercial revenue grew 70% year-over-year in Q4, with over 560 bootcamps completed across 465 organizations and a 32% overall commercial revenue increase.
  • In Q4, Palantir delivered $608 million in revenue (20% YoY), achieved a 34% adjusted operating margin, and reported its 5th consecutive quarter of GAAP profitability, generating $305 million in adjusted free cash flow.
  • Palantir’s US government segment remained muted in Q4 due to a continuing resolution and award timing, but management expects a reacceleration in 2024 supported by JADC2, Titan, and the Army Vantage extension.
  • International commercial momentum included multi-year renewals with Novartis, a leading European vehicle manufacturer and Swiss Re, plus expanded partnerships with Fujitsu for AIP and SampoCare for elder care platforms.
  • The company provided strong 2024 guidance of $2.65–2.67 billion in revenue, including >40% growth in US commercial to over $640 million, and reaffirmed quarterly GAAP operating income and net income targets.
AI Generated. May Contain Errors.
Earnings Conference Call
Palantir Technologies Q4 2023
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good afternoon. I'm Anna Saro from Palantir's finance team, and I'd like to welcome you to our Q4 2023 earnings call. We'll be discussing the results announced in our press release issued after the market closed and posted on our Investor Relations website. During the call, we will make statements regarding our business that may be considered forward looking within applicable securities laws, including statements regarding our Q1 fiscal 2024 results, management's expectations for our future financial and operational performance and other statements regarding our plans, prospects and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results.

Operator

Information concerning those risks is available in our earnings press release distributed after the market closed today and in our SEC filings. We undertake no obligation to update forward looking statements except as required by law. Further, during the course of today's call, we will refer to certain adjusted financial measures. These non GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, GAAP measures. Additional information about these non GAAP measures, including reconciliation of non GAAP to comparable GAAP measures, is included in our press release and investor presentation provided today.

Operator

Our press release, investor presentation and SEC filings are available on our Investor Relations website at investors. Palantir.com. Over the course of the call, we will refer to various growth rates when discussing our business. These rates reflect year over year comparisons unless otherwise stated. Joining me on today's call are Alex Karp, Chief Executive Officer Shyam Sankar, Chief Technology Officer Dave Glaser, Chief Financial Officer and Ryan Taylor, Chief Revenue Officer and Chief Legal Officer.

Operator

I'll now turn it over to Ryan to start the call.

Speaker 1

2023 was a tremendous year of opportunity and growth for our company, with U. S. Commercial at the forefront, which was meaningfully driven by AIP as the product and bootcamps as the go to market motion. We closed out the year with $608,000,000 in 4th quarter revenue, representing 20% year over year and 9% sequential growth. Our commercial business surpassed $1,000,000,000 in revenue over the last 12 months, a noteworthy milestone.

Speaker 1

And our Q4 commercial revenue grew 32% year over year. AIP and boot camps are accelerating our business, particularly in US commercial, where 4th quarter revenue grew 70% year over year, evidencing a significantly expanding addressable market. In October, We set a goal of executing 500 AIP bootcamps within 1 year. We have already blown that goal out of the water, Having completed more than 560 bootcamps across 465 organizations to date, we are deploying AIP to implement 100 of real tangible use cases in production for our customers. 1 boot camp attendee remarked, quote, What your team did in just 2 days was incredible.

Speaker 1

We can already think of 100 use cases for this, while another said, quote, It seems there are endless solutions. It seems there's nothing Palantir cannot do. When combining LLMs with Foundry through AIP, The ability to deploy use cases becomes much more widely accessible, so the addressable market expands considerably. We're seeing initial momentum as a result of that expansion while also still being at the starting line in the journey to capture that market. In our U.

Speaker 1

S. Commercial business, The expanding addressable market driven by AIP is propelling growth both through new customer acquisitions and expansions with existing customers. I've never before seen the level of customer enthusiasm and demand that we are currently seeing from AIP in U. S. Commercial.

Speaker 1

With regard to new customer acquisition, the expanding addressable market is reflected in the greater scale of the top of our sales funnel. And now we're doubling down on how we're converting boot camps to enterprise deals. We're already seeing evidence of boot camps helping to significantly compress sales cycles and accelerate the rate of new customer acquisition, which rose to 22% sequentially for U. S. Commercial in Q4 versus 12% and 4% in Q3 and Q2, respectively.

Speaker 1

And we more than doubled the number of U. S. Commercial deals with TCV of $1,000,000 or more from the Q4 in 2022 to 2023. We're also seeing a meaningful increase in our U. S.

Speaker 1

Commercial TCV on a dollar weighted duration basis, which is up 107% year over year and 42% sequentially. We signed a multitude of U. S. Commercial deals last quarter. Just to name a few, we signed deals over $25,000,000 each with one of the largest car rental companies, 1 of the largest telecommunication companies and one of the largest pharmaceutical and biotechnology corporations in the world.

Speaker 1

And then we Also signed deals over $10,000,000 each with an American consumer packaged goods holding company, an American automotive seat and electrical systems manufacturer, a comprehensive health network in the Midwest, and a large scale battery manufacturer. In addition, we signed deals over $5,000,000 each with an American bank holding company, a horseracing regulatory organization, one of the world's largest equipment rental companies, and one of the largest independent non profit cooperatives in the quick service restaurant industry. And these are just a few of the examples. Out of these deals, we're seeing several archetypes emerge as a result of AIP. 1st is the new customer who attends a boot camp and signs an enterprise contract shortly after for instance an American cable television provider signed a nearly $3,000,000 deal following cold outreach on LinkedIn that led to a 5 day boot camp, then an enterprise agreement, all in the span of last quarter.

Speaker 1

Then there's AIP driven conversions of ongoing pilots. Following a 2 year prospecting effort, a large American consumer packaged goods holding company agreed to a pilot, during which AIP was also introduced, then converted in December to a 5 year $19,000,000 contract. Then also there's AIP driven expansions in key existing accounts, including one of the world's largest telecommunication companies, where we demonstrated speed to value at bootcamps by delivering new use cases on top of the existing ontology in as little as 24 hours, with the results contributing to an agreement for a multimillion dollar expansion of our existing contract. Within our international commercial business, AIP is solidifying our long standing partnerships with existing customers, particularly in Continental Europe, while also driving pockets of growth in select markets. This includes the renewal of our long standing partnership with Novartis, a 5 year renewal with 1 of the largest European vehicle manufacturers and a 5 year renewal of our partnership with Swiss Re.

Speaker 1

In addition to boot camps, we are deepening distribution channels to more rapidly seize opportunities in certain regions, including Japan. In Q4, we expanded and extended our partnership with Fujitsu to enable them to bring AIP and data integration capabilities to their global client base. We also signed an expansion with SampoCare to enable delivery of their real data platform to nursing homes and elder care facilities. Both of these reflected a culmination of months long efforts prior to deal closing. In our government business, we are actively engaged across all theaters of crisis and conflict.

Speaker 1

The strength of our U. S. Government business is not reflected in the Q4 results, which remain muted. Some of this is due to the continuing resolution and timing of large potential contract awards, but it's also a function of the department's pace of scaling their AI and software efforts to match the realities of modern combat, particularly with JADC2. The department is responding to great power competition by ramping up investments in America's unique strength, software.

Speaker 1

We are focused on deploying on the battlefield and in large programs related to JADC2, combined with our rollout of Mission Manager and the 1st Breakfast initiatives, which is driving innovation in our engagement model with the government and the Defense Industrial Base. The Army has publicly indicated they anticipate down selection to a single vendor for the next phase of Titan to occur in Q2 of 2024. We also announced the extension of our partnership with the Army to continue operating and enhancing the Army Vantage platform, which is used for data driven operations and decision making. We will continue to onboard partners and demonstrate the value of Mission Manager during this option year to deliver on the Army's multi vendor ecosystem vision. On the strength of our work on the ground and our software that actually works, we expect reacceleration of our US government business in 2024.

Speaker 1

Conventional wisdom is that government acquisitions are slow, and then you need to invest in the programs that the government is buying in a 2 to 3 year acquisition cycle. And that's what programs like CD1, AIDP, Vantage and Titan look like. But our business has also been driven by urgent acquisitions to meet emergent needs that we predicted and invested in years ahead of time. As the US confronts conflict in 3 theaters And as all services seek rapid capabilities to meet those moments, we see substantial opportunity across the Department. Turning to our international government business, we are incredibly honored that the NHS chose Palantir to help deliver a federated data platform, while reducing administrative burden.

Speaker 1

Over the past few years, an increasing number of NHS trusts have used the software to reduce the care backlog. For example, At Chelsea and Westminster NHS Foundation Trust, it helped bring down the inpatient waiting list by 28% and operations canceled on the day due to missed preoperative assessments subsequently fell by half. In the 4th quarter, We also received funding from a partner nation related to our ongoing efforts in Eastern Europe, which had a substantial impact on our international government results. Recent world events and global conflicts illustrate the utmost importance of Palantir's mission. It's our duty to uphold our founding principles through our continued dedication to our allies in the midst of current events.

Speaker 1

We don't take this lightly. Last month, We held our board meeting in Tel Aviv, where I saw firsthand our commitment to and support for Israel. While there, we were proud to announce our strategic partnership to supply the Israeli Defense Ministry with technology to aid in addressing the Reflecting on 2023, we feel immense pride in the missions we are supporting and in our role shepherding our customers through the ongoing transformation of their enterprises with I'm proud of the incredible transformation of our enterprise in 2023, and I'm excited about what it will bring in 2024 as we conquer the expanding market. I'll now turn it over to Shyam.

Speaker 2

Thanks, Ryan. As Ryan mentioned, the expanding addressable market driven by AIP is propelling growth both through new customer acquisitions and expansions with existing customers. We continue to focus on accelerating the rate of boot camps with current and prospective customers. From customer feedback, the AI platform meets this moment like none other. AI has radically recalibrated customer expectations for software.

Speaker 2

Expectations at AIP and Foundry exceed by enabling the elegant integration of humans, software, and AI to deliver operational outcomes quickly. We are focused on the end to end problem of value creation, not a small, narrow technical slice. Accordingly, our platforms focus on tools, Not tuning on transforming business processes, not seeking iota's of insight. AIP is the AI powered operating system for the enterprise, Not a Q and A bot, not an agent framework, not a way to dabble,

Speaker 1

but a way to deliver.

Speaker 2

At a recent 2 day boot camp with a construction and engineering an architecture company. Our customer developed a production ready use case that provided $10,000,000 of savings. They used AIP to build an AI Our disruption manager application that processes production disruption notifications through AIP logic to determine what The best new production plan would be AIP, wielding a linear optimizer as a tool and using LLMs to parameterize and contextualize the disruption translates the notification to a clear understanding of impact on the optimized schedule. AIP logic and AIP automate then rerun the optimizer to generate opportunities to respond to disruption. 2 days, dollars 10,000,000 We have covered nearly 200 use cases coming out of all these boot camps, and we are just getting started.

Speaker 2

The core theory of value that has driven our product strategy for time eternal is data integration. That bringing new data into an operationally relevant context to expand the complexity, nuance and surface area of decision making always produces value. AIP enables us to integrate so many types of new data, video conferences, incident response calls, Slack rooms, PDFs, images, video, audio, and exploit them through the power of LLMs and ontology. So much of what data defines process is not actually in the system that runs that process, but instead in conversations, conference calls, videos of the factory floor or images of a site. What's in the enterprise process system is a lossy, latent representation of this reality.

Speaker 2

Our software always that phenomenon that the truth is out there, not in your ERP system or that blessed application. With AIP, We are investing in multimodal approaches to compound on this proven value driver and expand the addressable market of use cases within the enterprise. As I've said before, with AI and LLMs, you can't think your way through it. You have to get your hands dirty and work in anger to get use cases into production. In AIP, we have built a platform to deliver proof, not just proofs of concept to our customers.

Speaker 2

And boot camps are the way to flex that strength. At AIP Con 3, we will have many customers on stage showing you their great work. Come taste the pudding. Turning to government, Palantir is experiencing its own amazon.comtoaws moment, taking exquisite first party technology that supports the largest scale defense tech player and making it available for 3rd parties to build on and with. Gotham, Gaia, MetaConstellation, this is our software.

Speaker 2

Less well understood and now being commercialized is our software infrastructure, platforms like Apollo, the capabilities that we had to build over 20 years to enable Hundreds of dev teams to independently release 2,500 products and services to nearly a 1000 customer environments, including about a 100 air gapped environments, delivering 90,000 upgrades a week. This infrastructure abstracts away supply chain security, environment heterogeneity and infrastructure so that developers be operationally responsible for their services across it all, so they can focus on delivering innovation to the warfighter. And that's exactly why the Palantir government web services offering is so compelling. Dollars 100,000,000,000 has been by venture capitalists into defense tech since 2021. These companies want to compete on quality, not beating back bureaucracy.

Speaker 2

Government web services creates a capital and time efficient way to unlock market access for new entrants and incumbents alike. But even beyond defense tech companies, an extended set of these capabilities that we call mission manager are uniquely suited to delivering the capabilities that we have heard all government PMs asking for. Program offices want to pursue multi vendor, big tent ecosystem acquisition strategies with government owned and managed interfaces. The typical way to pursue this is with a systems integrator, where they are managing the integration with billable hours trained by humans. At Palantir, we do this with software as a software integrator.

Speaker 2

We see a more significant market opportunity and Mission Manager and Government Web Services over the long term than C2, Intel and data platforms alone. We have already launched Mission Manager projects, starting with the US Army, a customer whose needs and feedback have heavily shaped this offering. We continue to invest in relationships with the defense industrial base to help them bend metal more profitably and efficiently. In their earnings calls, America's prime signal that they're pulling back from getting substantially burned on firm fixed price contracts. This is a giant step in the wrong direction for America.

Speaker 2

So we want to lean in and help them optimize their supply chains, their production plans, to start with Foundry as their production software from day 0. M day was yesterday. We have no time to waste to mobilize America's industrial base to ramp production. Finally, our products could not be playing a more central role for real world events. Our AI enabled platforms are being leveraged maximally to support key US government goals in the Middle East.

Speaker 2

We have surged support to Israel to enable the Israeli Defense Forces and intelligence services to leverage Gaia, Gotham, Foundry, and AIP to tackle a growing list of use cases from tactical command and control, visual intelligence, forensics, readiness and production. At the same time, great power competition with China remains top of mind as we continue to invest in moving more of Palantir's mass west of the international date line. And we continue to support Ukraine's efforts directly and through allies. When the bat signal goes up, Palantir's Gotham platform and its family of products have always answered the call. At the same time, monetization of these efforts will take time.

Speaker 2

The principal Reason is that the DOD is at the very beginning of a long term allocation shift from hardware to software. For example, the army is spending a mere 0.015 percent of its budget on command and control software in fiscal year 24. But as we confront crisis and conflict in 3 theaters, this is changing. Growth is being driven by the incredible dynamism of the US commercial market, and U. S.

Speaker 2

Government will follow. With that, I'll hand it over to Dave to talk us through the financials.

Speaker 3

Thanks, Shyam. We had an exceptionally strong 4th quarter marked by our outperformance across revenue, profitability and cash flow. Revenue growth accelerated to 20% year over year in Q4 on the back of our U. S. Commercial business, which alone grew 70% year over year, a result driven by our momentum in AIP.

Speaker 3

Adjusted operating margin continued to expand to 34% in the 4th quarter, highlighting the strong unit economics of our business. We beat the high end of our guidance range on both revenue and adjusted operating margin, driving an 800 basis point sequential increase to our Rule of 40 score from 46 in the 3rd quarter to 54 in the 4th quarter. We also delivered our 5th consecutive quarter of GAAP profitability. In 2023, we generated $210,000,000 of GAAP net income, a $584,000,000 increase from 2022. In the Q4 alone, we generated nearly $100,000,000 in GAAP net income.

Speaker 3

We also delivered our 4th consecutive quarter of GAAP operating profit, generating $120,000,000 of GAAP operating income in 2023, a $281,000,000 increase year over year. Our GAAP operating profit accelerated in each quarter of last year, and in the Q4 alone, GAAP operating income increased 65% sequentially to $66,000,000 our highest quarter ever of GAAP operating income. We generated over $300,000,000 in adjusted free cash flow in the 4th quarter, representing a margin of 50% and over $730,000,000 of adjusted free cash flow for the full year. Turning to our global top line results. 4th quarter revenue accelerated to $608,000,000 up 20 percent year over year and 9% sequentially.

Speaker 3

We generated $2,230,000,000 of revenue in 2023, representing a growth rate of 17% year over year. We generated $1,380,000,000 in total U. S. Revenue in 2023, representing a growth rate of 19% year over year. Excluding the impact of revenue from strategic commercial contracts, 4th quarter revenue grew 20% year over year and 8% sequentially, and full year revenue grew 20% year over year.

Speaker 3

Customer count grew 35% year over year and 10% sequentially to 497 customers. Revenue from our largest customers continues to expand. 4th quarter trailing 12 month revenue from our top 20 customers increased 11% year over year to $55,000,000 per customer. Now moving to our Commercial segment. 4th quarter commercial revenue grew 32% year over year 13% sequentially to $284,000,000 Full year commercial revenue grew 20% year over year to over $1,000,000,000 surpassing the $1,000,000,000 mark for the first time.

Speaker 3

Excluding the impact from strategic commercial contracts, 4th quarter commercial revenue grew 35% year over year and 12% sequentially, and full year commercial revenue grew 28% year over year. 4th quarter commercial TCV booked was $699,000,000 our highest commercial TCV quarter in the company's history, representing 156% growth year over year and 74% growth sequentially. Last quarter, our U. S. Commercial business saw rapid acceleration and unprecedented demand.

Speaker 3

4th quarter U. S. Commercial revenue grew 70% year over year and 12% sequentially to 131,000,000 Full year U. S. Commercial revenue grew 36% year over year to $457,000,000 Excluding revenue from strategic commercial contracts, 4th quarter U.

Speaker 3

S. Commercial revenue grew 71% year over year and 8% sequentially, and full year U. S. Commercial revenue grew 52% year over year. Our momentum in AIP is driving both new customer conversions and existing customer expansions.

Speaker 3

The transformation that AIP is having on our business is best highlighted in our U. S. Commercial bookings and backlog. In the Q4, we booked $343,000,000 of U. S.

Speaker 3

Commercial TCV, representing 107% growth year over year on a dollar weighted duration basis. Total remaining deal value in our U. S. Commercial business grew 32% year over year and 28% sequentially. Our U.

Speaker 3

S. Commercial customer count grew to 221 customers, reflecting 55% growth year over year and 22% growth sequentially. 4th quarter international commercial revenue grew 11% year over year and 14% sequentially to $154,000,000 as we continue to capitalize on targeted growth opportunities in Asia, the Middle East and beyond. As Ryan mentioned, we've been capturing value and footprint from AIP momentum, and two examples are from our work with Fujitsu and Sampo. These customers have been using AIP for months prior to the deal's closing, resulting in some revenue catch up last quarter.

Speaker 3

Full year international commercial revenue grew 9% year over year to $546,000,000 Revenue from strategic commercial contracts was $20,000,000 for the quarter. We anticipate Q1 2024 revenue from these customers to decline to between $14,000,000 to $16,000,000 compared to $33,000,000 in the Q1 of 2023. We anticipate 2024 revenue from these customers to decline to approximately 2% of full year revenue compared to approximately 4% of revenue in 2023. Shifting to our government segment. 4th quarter government revenue grew 11% year over year and 5% sequentially to 324,000,000 Full year government revenue grew 14% year over year to $1,220,000,000 4th quarter U.

Speaker 3

S. Government revenue grew 6% year over year 3% sequentially to $237,000,000 Full year U. S. Government revenue grew 11% year over year to $921,000,000 As Ryan mentioned, while our 4th quarter U. S.

Speaker 3

Government results are muted due to the timing of larger contract awards, we expect our U. S. Government business to reaccelerate in 2024. 4th quarter international government revenue grew 27% year over year and 11% sequentially to $87,000,000 bolstered by our work in health care and defense. This included the receipt of funding from a partner nation related to our ongoing efforts in Eastern Europe, which resulted in a revenue catch up for the quarter.

Speaker 3

Full year international government revenue grew 23% year over year to $301,000,000 We had an outstanding quarter of bookings. 4th quarter TCV booked was $1,150,000,000 up 192 percent year over year and 38% sequentially. Net dollar retention was 108%, an increase of 100 basis points from last quarter. Net dollar retention does not include revenue from new customers that we acquired in the past 12 months and therefore does not yet fully capture the acceleration in our U. S.

Speaker 3

Commercial business. We ended the 4th quarter with $3,900,000,000 in total remaining deal value, an increase of 5% sequentially and $1,200,000,000 in remaining performance obligations, an increase of 28% year over year and 26% sequentially. As a reminder, RPO is primarily comprised of our commercial business as it does not take into account contracts with an initial term of less than 12 months and contractual obligations that fall beyond termination for convenience clauses, both of which are common in most of our government business. Turning to margin and expense. Adjusted gross margin, which excludes stock based compensation expense, was 84% for the quarter 82% for the year.

Speaker 3

Adjusted income from operations, which excludes stock based compensation expense and related employer payroll taxes, was $209,000,000 representing an adjusted operating margin of 34% and marking the 5th consecutive quarter of expanding adjusted operating margins. Full year adjusted income from operations was $633,000,000 representing margin of 28 percent and 600 basis point increase compared to 2022. Q4 adjusted expense was $399,000,000 up 1% sequentially and up 1% year over year. Full year adjusted expense was $1,600,000,000 up 7% year over year. Our bottom line outperformance in 2023 has positioned us to be able to escalate investment and resources to AIP.

Speaker 3

As a result, we expect expenses to increase in Q1, but remain focused on calibrating expense growth below revenue growth for the full year in order to continue delivering on our goals of sustained GAAP profitability and operating income. In the 4th quarter, we generated GAAP operating income of $66,000,000 representing an 11% margin, our 4th consecutive quarter of GAAP operating income. Full year GAAP operating income was 120,000,000 We generated 4th quarter GAAP net income of $93,000,000 representing a 15% margin, our 5th consecutive quarter of GAAP profitability. Full year GAAP net income was $210,000,000 4th quarter adjusted earnings per share was 0 point 0 $8 and GAAP earnings per share was 0 point 0 $4 Full year adjusted earnings per share was $0.25 and GAAP earnings per share was 0 point 0 $9 Additionally, Our combined revenue growth and adjusted operating margin accelerated to 54% in the 4th quarter, an 800 basis point increase to our Rule 40 score from the prior quarter. We continue to strive to maintain this exceptional balance of top and bottom line performance.

Speaker 3

Turning to our cash flow. In the 4th quarter, generated $301,000,000 in cash from operations and $305,000,000 in adjusted free cash flow, both representing a margin of 50%. In 2023, We generated $712,000,000 in cash flow from operations and $731,000,000 in adjusted free cash flow. We ended Q4 with $3,700,000,000 in cash, cash equivalents and short term U. S.

Speaker 3

Treasury securities. We retain access to additional liquidity of up to $500,000,000 through our revolving credit facility, which remains entirely undrawn. Now turning to our outlook. For Q1 2024, we expect revenue of between $612,000,000 $616,000,000 adjusted income from operations of between $196,000,000 $200,000,000 For full year 2024, we expect revenue of between $2,652,000,000 $2,668,000,000,000 US commercial revenue in excess of $640,000,000 representing a growth rate of at least 40% adjusted income from operations of between 834 $850,000,000 adjusted free cash flow of between $800,000,000 $1,000,000,000 $1,000,000,000 GAAP operating income and net income in each quarter of this year. With that, I'll turn it over to Alex for a few remarks and then Onno will kick off the Q and A.

Speaker 4

Welcome to our earnings. There's really so much to say. Obviously, our performance in U. S. Commercial is extraordinary, some would say bombastic.

Speaker 4

The numbers that just fly off the screen are the 70% year on year growth in Q4. The numbers that I almost had to turn the page when I saw them were the 100 and over 100 Contracts over $1,000,000 $37,000,000 over $5,000,000 and $21,000,000 roughly over $10,000,000 There is it's almost inconceivable to do that many contracts given the way our product used to be. And so what you see is a convergence of our product being easier to use and augmentation of its charisma, both driven by developments in AI, large language models, which make the product approachable foundry to the broader market. You also see just this enormous demand and our ability to meet that demand, with a pilot new piloting approach that we call boot camp. So we went like 2 years ago, we did 92 pilots.

Speaker 4

And last year, really mostly the second half of the year, we did over 500 boot camps. I go around the country now telling CEOs, CTOs and really whoever has $1,000,000 to buy our product and transform their Enterprise, take everything you've done in AI since you started, put your best people on it and we're going to show up at any time you want and we're going to run your data at a boot camp for 10 hours. And then you compare Your self pleasuring to our operationally relevant commercially valuable, critical to your enterprise results. Our 10 hours, your 10 months. Any products you want, any vendor you want, any hyperscaler you want, you pick them, we'll show up.

Speaker 4

The reaction to this because what America has obviously realized is this is real. But If you took the total number of people, total number of enterprises that are doing AI of any kind, including algebra, and said, it would be probably less than the 300. We have 300 customers that are creating operational results using our AIP pipeline. Operational meaning, define it how you want, I'm defining it as they'll pay $1,000,000 or more for it. So it's real.

Speaker 4

And we're doing this at a scale and pace that is inconceivable for Palantir up until recently. So and you have just have number after number after number, Interface after interface. This is there are some caveats. Europe has decided that They are not going to engage in this revolution. There are other caveats, for our society.

Speaker 4

I I don't want to spend too much time on that, but the winners are going to win more. This is a revolution for incumbents that have distribution and already strong products, which is why we're massively outperforming. There's some caveats for us internally. We're having to rebuild the whole system, our whole company to deal with this demand. We have a latent nascent sales force that has put its tiny toe in the water and has notice that can move around.

Speaker 4

We have to build that into a strong, aggressive machine. There are some positive caveats. We're doing this our way. We are not we are proud of our work on the front. We are proud that we support the U.

Speaker 4

S. We are proud that we support the U. S. Military. We are proud to have an operational crucial role in Ukraine and I am exceedingly proud that after October 7th within weeks we were on the ground and we are involved in operationally crucial operations in Israel.

Speaker 4

I know of no other software company in the world that has been engaged by Ukraine and Israel or in general, I'm not sure they bicep what software from any other company at our scale. These are momentous events built on the back of a 20 year assumption that software would define Our reality, the winners would be those that understood software, rejecting linear, narrow, sales driven software, Frankenstein Monster infrastructures that have been so historically popular for investment in Silicon Valley, rejecting sophism as not only an approach to business, meaning I only say what I believe if it doesn't matter or I never say what I believe. Those assumptions have seeped into our products, whether they're a military product or they're foundry our ontology or AIP. They also, by the way, for those listening who think our strategy is crazy, Many of your best people are applying to Palantir now. So while you we may be crazy, we are being bombarded by people who want to work at this company.

Speaker 4

Bombarded. I cannot a day does not go by where I'm not getting a call, an email, 50 attempts to get into our company. We are razor, we are white hot in recruiting. We're 20 year company with the strongest recruiting I've ever seen from a company that's historically had the strongest recruiting in the most competitive environment in the world, Silicon Valley. That is because we stand behind our values and because we intend to win with those values, which we're approving.

Speaker 4

So this was extraordinary last year. We also took care of making sure we're aligned internally on comp. We are streamlining our events, the way we go to market. And I would also say from the perspective as the leader of our movement, nominally called the CEO of our company. We have never been this aligned internally.

Speaker 4

We are a company that engages the most talented, interesting and difficult people in the world. Some of them are at this table. And there has never been a time where we have we have been this, motivated, this in unison and this proud of our company and our accomplishments. And so I'm proud to be proud with them and it's we are going to keep on our efforts and I foresee a very, very strong year, especially in U. S.

Speaker 4

Commercial. I would also say the strength of our U. S. Commercial and the strength of our products being used in the most difficult and most important war zones in the world is going to have a handoff function into USG. And I'm optimistic that handoff function will happen and we will be as successful there as we are in U.

Speaker 4

S. Comp.

Operator

With that, we'll begin with a few questions from our shareholders before we open up the call. Our first question is from Andrew. Given the significant increase in demand for AIP, the management team elaborate on the advancements made in formulating monetization strategy for these offerings?

Speaker 1

You're right to comment. The demand is off the charts for AIP, with boot camps as the delivery mechanism for AIP and we're seeing AIP drive the expanding the expanding addressable market that we're seeing. As Alex commented, we closed 103 deals in Q4 alone over $1,000,000 Having been involved in many of those, directly and on the ground, I can tell you that the feeling, the demand, the excitement over AIP and over over Palantir is unlike anything I've seen in the 14 years I've been here and we feel that we feel that in a tangible way on the ground with our customers and we're starting to see the beginnings of that in our Q4 results. In October, we set the goal of executing 500 boot camps for top of funnel for AIP. As you know, as noted, we've already exceeded that with over 560 boot camps just about 4 months later, and that is only continuing to increase that momentum.

Speaker 1

Then you see the results in U. S. Commercial, 70% year over year growth in revenue in Q4, 55% growth in customer count year over year, 107% growth in TCV closed on an adjusted basis. And then you see emerging from that the archetypes to the question of monetization, the archetypes of the types of monetization we're seeing. A while and with the introduction of A.

Speaker 1

I. P. That whole process has been accelerated. We're seeing that across the board and yet at the same time we barely touched that addressable market and we're really only at the beginning, so excited to see where that takes us.

Operator

Thanks, Ryan. Our next question is from Tanner who asks, What kind of interest has the Fed Start program seen as of late? Has the market responded to this? And will there be additional marketing made towards these start ups? And relatedly, when do you expect Apollo to be a significant contributor to Palantir's revenue?

Speaker 2

Great. Thanks, Tanner. Yeah, Fed start has been a hit, and I think it's easy to understand why. There's been $100,000,000,000 of capital that's flowed into the defense tech community at large. No one can afford the $2,000,000 it takes to achieve this accreditation.

Speaker 2

This provides market access. We've started with the intense focus on aisle 5 bringing bringing folks to the DOD market. We plan to release an aisle 6 Fed start at the end of Q2 and Fed ramp high at the end of Q3 early Q4. We're also going to be taking this to our allies. So we intend to launch Fed Start with the U.

Speaker 2

K. On the secret network and above top secret network later this year. Apollo is having its moment. I think it's the charisma it has with customers when they see it running at scale, running, managing all $2,200,000,000 of our revenue. I think a big part of this is they've spent the last 2 years trying to solve these problems on their own.

Speaker 2

And then this really understand how much value contribute to them, how much it can accelerate them, both on the government program side, but also on the company side, where companies are struggling with how to efficiently deliver modern software into these environments. But I think that the bigger thing that I'm really excited about is Mission Manager, which is Apollo Rubix, which is our 0 Trust Compute and Networking Infrastructure and the Ontology Software Development Kit, the OSDK, as a combined offering to the government to really give the government what they've been asking for, which is infrastructure that allows them to build and manage multi vendor big tent ecosystems that drive continuous competition and allow the government to actually control the interfaces and avoid lock in. And so you can think of FedStart as actually the first product that we've launched on top of Mission Manager Infrastructure. We've started doing other projects, including Army C2 work, but that's going to be a very exciting trend for

Speaker 4

us. Let me just give an addendum here. Sham launched and built FedStart, but it has But one of the most important things it did is before we launched FedStart, the $100,000,000,000 of investment in kind of new defense tech largely had the impression Palantir was competitive with them. And we weren't competitive with them. And FedStart aligns all those venture capitalists and all their investments and most of their companies with Palantir because we can allow them to get on to classified networks much quicker so that they can actually show results to their investors much quicker.

Speaker 4

And that means a lot of the resistance to us is not only disappearing, but it's going it's actually been converted into support for Palantir, support for what we're doing. And those people are really helping spread the obvious Palantir gospel. Instead of wondering how they can compete with us, they're wondering how we can succeed together.

Operator

Thank you both. Our next question is from Keith. Is your greatest competitor still your potential customers own IT department or has that changed?

Speaker 2

Thanks, Keith. We certainly used to feel that way, but when you look at boot camps, you look at how much charisma AIP has with IT And the fact that we're winning with IT, with Apollo, with the OSDK, with capabilities like marketplace, that's certainly not the case anymore. IT has become some of our biggest champions. I think what that's revealed for us is that perhaps the issue was never actually IT. It was this software industrial complex.

Speaker 2

Everything Alex was talking about earlier, these thin products that were really designed to sell and and and they're more like a drug than they are like medicine and this this sort of strict adherence to architectural conformity. But what I think is exciting about Gen AI is it's blown up all of that. You know, it's been a big reset button here. The whole map, the whole architecture is up for grabs, And we're working very closely with IT to write that map, to write the architecture that is actually delivering all these operational use cases for these customers.

Speaker 4

One of the coolest things about going to these meetings is it used to be 3, 4 years ago, you could predict who was going to like us and who wasn't, and it's just not anymore. You go to these meetings and they'll often be the IT person telling the CEO, like, look, we have no choice. We need to install this quickly. And so, there's a cultural shift in the U. S.

Speaker 4

I don't think it's outside the U. S. The case, but inside the U. S, for global business value. They're not that interested in putting together a PowerPoint and showing how that could work in theory.

Speaker 4

They've got to show themselves, their company, their workers, the whole that they're going to get actual revenue either driving or quality of revenue driving results quickly. And they are almost exclusively now our friends. Maybe they can talk to some analysts. Like, we can can convert you guys too.

Operator

Thanks. Our next question is from Mariana with Bank of America. Mariana, can you please turn on your camera and then you'll receive a prompt to unmute your line.

Speaker 5

Good afternoon, everyone. So I have two questions, 1 in US government and the second one today on financials. So the first one is this, you mentioned in your prepared remarks, we accelerating US government growth and opportunities across the board. But this is contrasting to what we have heard from the PRIMES this quarter. They have agreed that more things are moving towards software, but they argue that the DoD has to figure out how to buy software, and they have to figure out how to sell software.

Speaker 5

From your point of view, how large is the change that is needed in this award approach, but also How large is the advantage that Palantir has in this environment where you have been selling software for a long time now?

Speaker 2

Yeah. Look, we've been doing this for for 2 decades, as you point out, and I think that gives us a perspective of what was it like 2 decades ago and what is it like now? And it's wildly different and so much has changed. Now, I don't want to underestimate how much has to continue changing, and I think the department recognizes that and is is working on that. But do not acknowledge the progress, I think, would would be disingenuous here.

Speaker 2

Unlike the primes who used to focus in hardware and now responding to software, we've always focused on software. One of the things about software is it evolves incredibly quickly. If you think about the software we were deploying, to do the Afghan noncombatant evacuation operations and how much that evolved moving into Ukraine, how much that evolved moving into the current crisis in CENTCOM. It is evolving faster than procurement can procure it. I think one of the unique strengths that we have is that we're cons we are investing and mutating and managing the software independent of the actual procurement actions, and that means that we always have software that's so far in the future that it will meet the moment that the DoD actually has.

Speaker 4

As an addendum to that, The core thesis of this of talent here was always the reality of a disjointed violent world Forces, Pareto optimal conditions on institutions. So I believe that everyone knows we have the best software in the world. It may not matter in a non dangerous environment, but it did matter in Ukraine and Israel and who did they buy. It does matter. Our software is running in I don't I'll never know what I'll say, but in among the most critical places in the DOD.

Speaker 4

If you fought if we are forced to fight a 3 pronged war, You cannot do that even from a perspective of keeping our munitions, ready without accurate software. So the more dangerous, the more real it gets, the more battle tested and real your software has to be. I believe it's about to get very real. Why? Because our GDP growth is significantly better than China's.

Speaker 4

Now I know the always wrong crowd says we then should get peace, but I'm telling you that the rational result of the rational, consequence of that is our adversaries are like, America's gonna be stronger tomorrow than today. It's like they don't have a GDP story because they cannot they do not build these systems as well as we do. They do not have the tech community we do. And they do not have the U. S.

Speaker 4

Market like we do. Look at our results. And so as this becomes more and more dangerous, every company in the world, whether they're small, big, whether they're a startup, whether they're the one of the largest primes or whether us, is going to have to actually prove their software works on the battlefield. We love that. We want to prove and we welcome and relish proving environments.

Speaker 4

If it was up to me, software would only be deployed at America and Western Allies if it was proven on the battlefield. Unfortunately, For us, our adversaries are going to force that kind of adjudication. And how do we and then if you and for those of you who can't evaluate that because you don't have access to our software in the battlefield, though you could read the news and see what Israel has done and what Ukraine has done. Look what's happening in U. S.

Speaker 4

Commercial. You have a completely rational environment where we're deploying and growing the way we're growing with almost no sales force. And, it's because it really matters. And when it really matters, the fact that they may not like my jokes or my habits, We'll protect your life, and that's where that's why we're going to do well.

Operator

Thank you, Alex. Our next question is from Dan with Wedbush. Dan, please turn on your camera and then you'll receive a prompt to unmute your line.

Speaker 2

So

Speaker 6

I think inconceivable is the right word in terms of everything that you produced this quarter. My question would be, Are you starting to actually see an acceleration in terms of AIP customer engagement, not even just from Q4, but even starting 2024.

Speaker 4

You want to handle that as the man on the front line?

Speaker 1

Yeah. I mean, The answer is yes, absolutely. And I think we're still very early obviously with AIP and the rollout and very early in the market. But as far as what we're seeing from customers, you see I mean, just see like kind of Q3 to Q4 results and then what we're seeing in the conversations we're having with customers, the way that it's been adopted by the business, as Alex talked about in the conversations we're having with customers, we're seeing that acceleration. We expect that to continue.

Speaker 4

Also, just like we do these AIP conferences, I think we invited, you and your team, we can't do enough of them. We're telling we're limiting the number of people who can come. It's like a rock concert. It's like, yeah, if you know somebody, we can get you in the back we can get you backstage. You know, it's by the way, for those of you who are evaluating our company, We are going to invite all of you to our boot camps.

Speaker 4

Please use as you did, but like take a look at the software. It's like we are not arguing in the abstract or in a PowerPoint or according to what you may have learned at business school that is better. We are arguing that it is better. And there's no other way to show that than to do it. But to your question, yes, like, we've we're already overfilled for our AIP boot camp, and it's just we don't know how to deal actually with this demand.

Speaker 4

And so we're rebuilding the company. We have a lot of employees in Germany and France. I'm telling them it's time to pack up and come to America. I'm telling, you know, I'm telling our hiring. We are hiring here.

Speaker 4

We are having, as I mentioned, a bonanza in people wanting to work here because People are quite frankly tired of working for people who seemingly only have an opinion when it doesn't matter and with products that may not work. We're looking at I'm getting personally involved in the recruiting again, to get more people but exactly the right people, and we're going to scale against the demand, but it is a real thing.

Operator

Thank you. Alex, as usual, we have a lot of our shareholders on the line. Is there anything you'd like to say before we end the call?

Speaker 4

I mean, it's We are fighting for the West and its allies to be stronger, and we are I very much appreciate your support. At this company, we think about our investors. Our most important investors are at Palantir. Our second most important investors are people investing their own money. And we relish your support, and it gives us a lot of motivation.

Speaker 4

I meet individual investors every time I go to a customer, basically. And I've had individual investors I've met at 2, 3 am on a VTC. And I asked them, well, why are you working at 3 am to make your enterprise better in AIP or foundry. And they basically all say the same thing because Palantir is fighting for my rights and my liberty. And we are fighting for your rights and your liberty, and we are going to continue to fight for that the way we do that, which is by delivering the best products to our allies by hurting our adversaries and by giving U.

Speaker 4

S. Commercial the strength it needs to massively outperform every other country in the world. Thank you.

Operator

Thanks, Alex. That concludes Q and A for today's call.

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