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Palantir 10-Q: RPO flat, contracts shorter, prepayments up

  • Bad news: Remaining performance obligations were flat at $4.9 billion and total contract value rose only 6%, so two measures are weakening together.
  • Good news: Current deferred revenue rose 62% and customer prepayments 44%, a sign demand is real.
  • Mixed: Headcount rose 233 to 4,634, the biggest quarterly hiring in a year, moving further from Karp's target of 3,600.
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Palantir filed its 10-Q on 3 Nov. Remaining performance obligations (RPO) of $4.9 billion were flat on the second quarter (up 88% year on year). The part due within 12 months, $2.16 billion, was only 2% higher quarter on quarter, and the share beyond 36 months fell from 21% to 19%.

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Management explains this by the structure of government contracts and shorter contract terms. But total contract value was up only 6% year on year and RPO was flat, so two measures are weakening together. If the fourth quarter is flat again, treat it as a genuine slowdown. The offsetting signal is on the liabilities side: current deferred revenue was $661 million (up 62%) and customer prepayments $513 million (up 44%), for total contract liabilities of $1.2 billion. Customers are willing to pay first, so demand looks real, but contracts have shifted from long commitments to short terms plus prepayment. Headcount was 4,634, up 233 (5.3%) quarter on quarter, the biggest quarterly hiring in a year. Annualised revenue per employee is about $2 million. The scissors gap is still wide, but the company is moving further from Karp's target of 3,600. The earnings call gave examples of small pilots growing into large contracts (industrial materials $3 million to $29 million; sportswear brand $1.6 million to $21 million; home appliances $1 million to $15 million; apparel $2.5 million to $11.5 million), which helps explain why contracts are getting shorter. The AIG example is Sankar's own account. Page 209 of Anthropic's prospectus reportedly does not mention Palantir, so it cannot be independently verified for now.

Key evidence

  • 10-Q filed 3 Nov (checked against the SEC original). RPO of $4.9 billion was flat on the second quarter (XBRL series in hundreds of millions of dollars: 4Q 41, 1Q 45, 2Q 49, 3Q 49), still up 88% year on year
  • 44% is to be recognised in the next 12 months (2Q 43%, 1Q 39%, 4Q 38%), or about $2.16 billion, up only 2% quarter on quarter. The part beyond 36 months fell from 21% to 19%, so the long tail is shrinking
  • The $2.16 billion due within 12 months compares with fourth-quarter revenue guidance of $2.65 billion, so most revenue comes from short or cancellable contracts. RPO excludes contracts with an original term of 12 months or less, and cancellable contracts
  • A cold shower: total contract value was up only 6% year on year and RPO was flat, so two measures are weakening together. If the fourth quarter is flat again, structure can no longer explain it away
  • Current deferred revenue was $661 million ($409 million at the start of the year, up 62%). Customer prepayments were $513 million ($357 million at the start of the year, up 44%, cancellable so not in RPO). Total contract liabilities were $1.2 billion ($800 million at the start of the year)
  • Headcount was 4,634 (from the 10-Q itself), up 233 (5.3%) on 4,401 in the second quarter, the biggest quarterly hiring in a year. A year earlier it was 4,414, so headcount is up 5.0% year on year
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  • Revenue is up 96% against headcount up 5%. Annualising third-quarter revenue gives about $2 million per employee
  • Weekly Lever tracking of job postings fell to 301, moving further from the 3,600 headcount Karp has talked about
  • Conversion examples from the call (Motley Fool transcript): an industrial materials company went from a pilot of nearly $3 million in 2Q to annual contract value of $29 million in 3Q
  • A sportswear brand went from a $1.6 million pilot to about $21 million. A home appliance company went from $1 million to $3 million, then to $15 million in the same quarter. An apparel company went from $2.5 million to $11.5 million
  • Maven has more than 100,000 users and is open to every branch of the military
  • Sankar said that page 209 of Anthropic's prospectus describes AIG's underwriting automation as running entirely on AIP, implemented by Palantir and AIG together. Anthropic's page reportedly does not mention Palantir, and this cannot be independently verified for now

Catalysts to watch

  • Fourth quarter (reported in 1Q 2027): whether RPO and total contract value are still flat decides if this is treated as a genuine slowdown
  • Fourth-quarter headcount: tests whether third-quarter hiring was a one-off. Weekly Lever tracking
  • AIG and Palantir on AIP: independent verification against page 209 of Anthropic's prospectus
  • Renewals and expansion after Maven opened to every branch of the military

Risks

  • RPO and total contract value are weakening together, so the structural explanation may expire
  • Hiring is moving away from Karp's 3,600 target. If the revenue-per-employee scissors gap narrows, the narrative suffers
  • The pilot conversion examples were all chosen by the company, so the sample is biased
  • The AIG example cannot be independently verified and is Sankar's account alone
  • RPO due within 12 months covers only 82% of fourth-quarter revenue guidance, so demand visibility was low to begin with

Sources 4

  1. Palantir 10-Q, 3 Nov (SEC original)
  2. Motley Fool earnings call transcript
  3. Weekly Lever job posting tracking
  4. Anthropic prospectus, page 209 (to be verified)