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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 001-39540
________________________________________________

Palantir Technologies Inc.
(Exact Name of Registrant as Specified in its Charter)
________________________________________________
Delaware68-0551851
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1200 17th Street, Floor 15
Denver, Colorado
80202
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (720) 358-3679
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange
on which registered
Class A Common Stock, par value $0.001 per share
PLTR
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of April 30, 2024, there were 2,130,337,481 shares of the registrant’s Class A common stock outstanding, 95,553,958 shares of the registrant’s Class B common stock outstanding, and 1,005,000 shares of the registrant’s Class F common stock outstanding.
1




TABLE OF CONTENTS
Page

2

Table of contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Palantir Technologies Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited)
As of March 31, 2024As of December 31, 2023
Assets
Current assets:
Cash and cash equivalents$520,388 $831,047 
Marketable securities3,347,512 2,843,132 
Accounts receivable, net486,986 364,784 
Prepaid expenses and other current assets81,178 99,655 
Total current assets4,436,064 4,138,618 
Property and equipment, net46,906 47,758 
Operating lease right-of-use assets173,707 182,863 
Other assets150,402 153,186 
Total assets$4,807,079 $4,522,425 
Liabilities and Equity
Current liabilities:
Accounts payable$35,634 $12,122 
Accrued liabilities206,034 222,991 
Deferred revenue237,195 246,901 
Customer deposits217,634 209,828 
Operating lease liabilities54,056 54,176 
Total current liabilities750,553 746,018 
Deferred revenue, noncurrent20,722 28,047 
Customer deposits, noncurrent1,651 1,477 
Operating lease liabilities, noncurrent163,013 175,216 
Other noncurrent liabilities9,968 10,702 
Total liabilities945,907 961,460 
Commitments and Contingencies (Note 7)
Stockholders’ equity:
Common stock, $0.001 par value: 20,000,000 Class A shares authorized as of March 31, 2024 and December 31, 2023; 2,130,393 and 2,096,982 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively; 2,700,000 Class B shares authorized as of March 31, 2024 and December 31, 2023; 95,565 and 102,141 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively; and 1,005 Class F shares authorized, issued, and outstanding as of March 31, 2024 and December 31, 2023
2,227 2,200 
Additional paid-in capital9,322,803 9,122,173 
Accumulated other comprehensive income (loss), net(5,720)801 
Accumulated deficit(5,544,083)(5,649,613)
Total stockholders’ equity3,775,227 3,475,561 
Noncontrolling interests85,945 85,404 
Total equity3,861,172 3,560,965 
Total liabilities and equity$4,807,079 $4,522,425 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Table of contents
Palantir Technologies Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
    
Three Months Ended March 31,
20242023
Revenue$634,338 $525,186 
Cost of revenue116,256 107,645 
Gross profit518,082 417,541 
Operating expenses:
Sales and marketing193,177 187,093 
Research and development110,040 90,100 
General and administrative133,984 136,233 
Total operating expenses437,201 413,426 
Income from operations80,881 4,115 
Interest income43,352 20,853 
Other income (expense), net(13,507)(4,136)
Income before provision for income taxes110,726 20,832 
Provision for income taxes4,655 1,681 
Net income106,071 19,151 
Less: Net income attributable to noncontrolling interests541 2,349 
Net income attributable to common stockholders$105,530 $16,802 
Net earnings per share attributable to common stockholders, basic$0.05 $0.01 
Net earnings per share attributable to common stockholders, diluted$0.04 $0.01 
Weighted-average shares of common stock outstanding used in computing net earnings per share attributable to common stockholders, basic2,213,545 2,107,780 
Weighted-average shares of common stock outstanding used in computing net earnings per share attributable to common stockholders, diluted2,400,107 2,217,439 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Table of contents
Palantir Technologies Inc.
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
Three Months Ended March 31,
20242023
Net income$106,071 $19,151 
Other comprehensive income (loss)
Foreign currency translation adjustments(1,899)1,015 
Net unrealized gain (loss) on available-for-sale securities(4,622)285 
Comprehensive income99,550 20,451 
Less: Comprehensive income attributable to noncontrolling interests541 2,349 
Comprehensive income attributable to common stockholders$99,009 $18,102 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Table of contents
Palantir Technologies Inc.
Condensed Consolidated Statements of Equity
(in thousands)
(unaudited)

Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income, NetAccumulated DeficitTotal Stockholders’ EquityNoncontrolling InterestsTotal Equity
SharesAmount
Balance as of December 31, 20232,200,128 $2,200 $9,122,173 $801 $(5,649,613)$3,475,561 $85,404 $3,560,965 
Issuance of common stock from the exercise of stock options17,482 17 83,823 — — 83,840 — 83,840 
Issuance of common stock upon release of restricted stock units (“RSUs”) and performance-based RSUs (“P-RSUs”)9,721 10 (10)— — — —  
Stock-based compensation— — 125,817 — — 125,817 — 125,817 
Repurchases of common stock(368)— (9,000)— — (9,000)— (9,000)
Other comprehensive income— — — (6,521)— (6,521)— (6,521)
Net income— — — — 105,530 105,530 541 106,071 
Balance as of March 31, 20242,226,963 $2,227 $9,322,803 $(5,720)$(5,544,083)$3,775,227 $85,945 $3,861,172 
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Loss, NetAccumulated DeficitTotal Stockholders’ EquityNoncontrolling InterestsTotal Equity
SharesAmount
Balance as of December 31, 20222,099,075 $2,099 $8,427,998 $(5,333)$(5,859,438)$2,565,326 $77,111 $2,642,437 
Issuance of common stock from the exercise of stock options5,381 5 25,919 — — 25,924 — 25,924 
Issuance of common stock upon vesting of RSUs13,274 13 (13)— — — —  
Stock-based compensation— — 114,666 — — 114,666 — 114,666 
Other comprehensive loss— — — 1,015 — 1,015 — 1,015 
Net income— — — — 16,802 16,802 2,349 19,151 
Balance as of March 31, 20232,117,730 $2,117 $8,568,570 $(4,318)$(5,842,636)$2,723,733 $79,460 $2,803,193 
    


The accompanying notes are an integral part of these condensed consolidated financial statements.
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Palantir Technologies Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended March 31,
20242023
Operating activities
Net income$106,071 $19,151 
 Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization8,438 8,320 
Stock-based compensation125,651 114,714 
Noncash operating lease expense12,366 10,836 
Unrealized and realized (gain) loss from marketable securities, net12,354 8,508 
Noncash consideration(11,907)(7,596)
Other operating activities(6,774)(6,670)
Changes in operating assets and liabilities:
Accounts receivable, net(121,884)2,709 
Prepaid expenses and other current assets19,399 1,252 
Other assets3,525 (4,551)
Accounts payable23,809 (39,921)
Accrued liabilities(19,105)4,271 
Deferred revenue, current and noncurrent(14,802)43,238 
Customer deposits, current and noncurrent7,953 43,631 
Operating lease liabilities, current and noncurrent(15,482)(10,536)
Other noncurrent liabilities(33)20 
Net cash provided by operating activities129,579 187,376 
Investing activities
Purchases of property and equipment(2,664)(4,755)
Purchases of marketable securities(1,260,327)(2,310,367)
Proceeds from sales and redemption of marketable securities751,746 709,459 
Proceeds from sales of alternative investments 51,072 
Net cash used in investing activities(511,245)(1,554,591)
Financing activities
Proceeds from the exercise of common stock options83,840 25,924 
Repurchases of common stock(9,000) 
Other financing activities408 59 
Net cash provided by financing activities75,248 25,983 
Effect of foreign exchange on cash, cash equivalents, and restricted cash(4,024)2,676 
Net decrease in cash, cash equivalents, and restricted cash(310,442)(1,338,556)
Cash, cash equivalents, and restricted cash - beginning of period850,107 2,627,335 
Cash, cash equivalents, and restricted cash - end of period$539,665 $1,288,779 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization
Palantir Technologies Inc. (including its subsidiaries, “Palantir” or the “Company”) was incorporated in Delaware on May 6, 2003. The Company builds and deploys software platforms that serve as the central operating systems for its customers.
2. Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The accompanying condensed consolidated financial statements include the accounts of Palantir Technologies Inc. and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in entities where the Company holds at least a 20% ownership interest and has the ability to exercise significant influence over, but does not control, the investee are accounted for using the equity method of accounting. Certain prior year balances have been reclassified to conform to the current year presentation. Such reclassifications did not affect total revenues, income from operations, net income, or cash flows. The Company's fiscal year ends on December 31.
The unaudited condensed consolidated balance sheet as of December 31, 2023 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including certain notes required by GAAP on an annual reporting basis. In management’s opinion, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets and statements of operations, comprehensive income, stockholders’ equity, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year or any future period.
These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes included in its Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 20, 2024.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods.
Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not limited to, the identification of performance obligations in customer contracts, the valuation of deferred tax assets and uncertain tax positions, and the collectability of contract consideration, including accounts receivable. Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates and such differences could affect the Company’s financial position and results of operations.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are discussed in Note 2. Significant Accounting Policies in the notes to consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 20, 2024. There have been no significant changes to these policies during the three months ended March 31, 2024, except for the changes noted below.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents primarily consist of amounts invested in money market funds and available-for-sale debt securities.
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Restricted cash primarily consists of cash and certificates of deposit that are held as collateral against letters of credit and guarantees that the Company is required to maintain for operating lease agreements, certain customer contracts, and other guarantees and financing arrangements.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the amounts shown in the condensed consolidated statements of cash flows (in thousands):
As of March 31,
20242023
Cash and cash equivalents$520,388 $1,264,738 
Restricted cash included in prepaid expenses and other current assets 11,946 
Restricted cash included in other assets19,277 12,095 
Total cash, cash equivalents, and restricted cash$539,665 $1,288,779 
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the invoiced amount, net of an allowance for credit losses. The Company generally grants non-collateralized credit terms to its customers. Allowance for credit losses is based on the Company’s best estimate of probable losses inherent in its accounts receivable portfolio and is determined based on expectations of the customer’s ability to pay by considering factors such as customer type (commercial or government), historical experience, financial position of the customer, age of the accounts receivable, current economic conditions, and reasonable and supportable forward-looking factors about its portfolio and future economic conditions. Accounts receivable are written-off and charged against an allowance for credit losses when the Company has exhausted collection efforts without success. Based upon the Company’s assessment as of March 31, 2024 and December 31, 2023, the Company recorded an allowance for credit losses of $8.5 million and $10.5 million, respectively.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, accounts receivable, marketable securities, and privately-held equity securities. Cash equivalents primarily consist of money market funds and U.S. treasury securities with original maturities of three months or less, which are invested primarily with U.S. financial institutions. Cash deposits with financial institutions, including restricted cash, generally exceed federally insured limits. Management believes minimal credit risk exists with respect to these financial institutions and the Company has not experienced any losses on such amounts.
The Company is exposed to concentrations of credit risk with respect to accounts receivable presented on the condensed consolidated balance sheets. The Company’s accounts receivable balances as of March 31, 2024 and December 31, 2023 were $487.0 million and $364.8 million, respectively. Customer I represented 22% of total accounts receivable as of March 31, 2024. Customer I represented 15% of total accounts receivable as of December 31, 2023. No other customer represented more than 10% of total accounts receivable as of March 31, 2024 and December 31, 2023.
For the three months ended March 31, 2024, no customer represented more than 10% of total revenue. For the three months ended March 31, 2023, Customer K, which is in the government operating segment, represented 10% of total revenue. No other customer represented more than 10% of total revenue for the three months ended March 31, 2023.
Share Repurchase Program
Share repurchases are recorded at trade date and the repurchase price is inclusive of any related fees and commissions. Upon retirement, the par value of the Class A common stock repurchased is deducted from common stock with the excess of repurchase price recorded to additional paid-in capital on the Company’s condensed consolidated balance sheets.
Stock-Based Compensation
The Company accounts for stock-based compensation expense in accordance with the fair value recognition and measurement provisions of GAAP, which require compensation cost for the grant-date fair value of stock-based awards to be recognized over the requisite service period. The Company determines the fair value of stock-based awards granted or modified on the grant date or modification date using appropriate valuation techniques. The Company recognizes forfeitures as they occur.
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Service-Based Vesting
The Company grants RSUs and stock option awards that vest based upon the satisfaction of only a service condition. The Company determines the grant-date fair value of the RSUs as the fair value of the Company’s common stock on the grant date. The Company records stock-based compensation expense for stock options and RSUs that vest based upon the satisfaction of only a service condition on a straight-line basis over the requisite service period, which is generally one to four years. For stock option awards, the Company uses the Black-Scholes option pricing model to determine the fair value of the stock options granted. The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected term of the option, the expected volatility of the price of the common stock, risk-free interest rates, and the expected dividend yield of the common stock. The assumptions used to determine the fair value of the option awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment.
Performance-Based Vesting
The Company also grants awards, including RSUs, that vest upon the satisfaction of both a service condition and a performance condition. The Company determines the grant-date fair value of RSUs with both a service-based vesting condition and a performance-based vesting condition as the fair value of the Company’s common stock on the grant date and records stock-based compensation expense using the accelerated attribution method over the service period. The performance-based vesting condition for the RSUs granted prior to September 30, 2020, the date the Company completed a direct listing of its Class A common stock on the New York Stock Exchange (the “Direct Listing”) was satisfied upon the occurrence of the Company’s Direct Listing. For P-RSUs granted after the Direct Listing, the Company recognizes expense from the number of P-RSUs expected to vest, determined based on the level of achievement against certain performance conditions, over the requisite service period when it is probable that the performance condition will be achieved.
Market-Based Vesting
The Company grants awards, including stock appreciation rights (“SARs”), that vest upon the satisfaction of market-based vesting conditions. The Company estimates the fair value of the awards granted and the corresponding derived service period using the Monte Carlo simulation model, which requires the use of various assumptions including the contractual term, expected stock price volatility, risk-free interest rate, suboptimal exercise factor, annual post-vest termination rate, and cost of capital as of the grant date. Stock-based compensation expense for these awards is recognized straight-line over the estimated derived service period. If the market condition is achieved earlier than its estimated derived service period, the stock-based compensation expense will be accelerated, and a cumulative catch-up expense will be recorded during the period in which the market condition is met. Once the derived service period is complete, previously recognized stock-based compensation expense related to market-based SARs will not be reversed even if the specified market condition is not achieved.
3. Contract Liabilities and Remaining Performance Obligations
Contract Liabilities
The Company’s contract liabilities consist of deferred revenue and customer deposits. As of March 31, 2024 and December 31, 2023 the Company's contract liability balances were $477.2 million and $486.3 million, respectively. Revenue of $244.3 million and $192.4 million was recognized during the three months ended March 31, 2024 and 2023, respectively, that was included in the contract liability balances as of December 31, 2023 and 2022, respectively.
Remaining Performance Obligations
The Company’s arrangements with its customers often have terms that span over multiple years. However, the Company allows many of its customers to terminate contracts for convenience prior to the end of the stated term with less than twelve months’ notice. Revenue allocated to remaining performance obligations represents noncancelable contracted revenue that has not yet been recognized, which includes deferred revenue and, in certain instances, amounts that will be invoiced. The Company has elected the practical expedient allowing the Company to not disclose remaining performance obligations for contracts with original terms of twelve months or less. Cancelable contracted revenue, which includes customer deposits, is not considered a remaining performance obligation.
The Company’s remaining performance obligations were $1.3 billion as of March 31, 2024, of which the Company expects to recognize approximately 53% as revenue over the next 12 months, 38% as revenue over the subsequent 13 to 36 months, and the remainder thereafter.
Disaggregation of Revenue
See Note 12. Segment and Geographic Information for disaggregated revenue by customer segment and geographic region.
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
4. Investments and Fair Value Measurements
The following tables present the Company’s assets that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation (in thousands):
As of March 31, 2024
TotalLevel 1Level 2Level 3
Assets:
Cash and cash equivalents:
Money market funds$327,561 $327,561 $ $ 
Prepaid expenses and other current assets and other assets:
Certificates of deposit4,789  4,789  
Marketable securities:
U.S. treasury securities3,338,799  3,338,799  
Publicly-traded equity securities8,713 8,713   
Total$3,679,862 $336,274 $3,343,588 $ 
As of December 31, 2023
TotalLevel 1Level 2Level 3
Assets:
Cash and cash equivalents:
Money market funds$576,565 $576,565 $ $ 
U.S treasury securities10,079  10,079  
Certificates of deposit938  938  
Prepaid expenses and other current assets and other assets:
Certificates of deposit4,777  4,777  
Marketable securities:
U.S. treasury securities2,824,861  2,824,861  
Publicly-traded equity securities18,271 18,271   
Total$3,435,491 $594,836 $2,840,655 $ 
Certificates of Deposit
The Company’s certificates of deposit are Level 2 instruments. The fair value of such instruments is estimated based on valuations obtained from third-party pricing services that utilize industry standard valuation models, including both income-based and market-based approaches, for which all significant inputs are observable either directly or indirectly. These inputs include interest rate curves, foreign exchange rates, and credit ratings.
Debt Securities
As of March 31, 2024, available-for-sale debt securities, all of which are included in marketable securities on the condensed consolidated balance sheet, consisted of the following (in thousands):
As of March 31, 2024
Amortized CostUnrealized GainsUnrealized LossesFair Value
U.S. treasury securities$3,341,779 $549 $(3,529)$3,338,799 
Total debt securities$3,341,779 $549 $(3,529)$3,338,799 
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
As of December 31, 2023, available-for-sale debt securities consisted of the following (in thousands):
As of December 31, 2023
Amortized CostUnrealized GainsUnrealized LossesFair Value
U.S. treasury securities$2,831,505 $4,520 $(1,085)$2,834,940 
Total debt securities$2,831,505 $4,520 $(1,085)$2,834,940 
Included in cash and cash equivalents$10,078 $1 $ $10,079 
Included in marketable securities$2,821,427 $4,519 $(1,085)$2,824,861 
The Company did not sell any available-for-sale debt securities during the three months ended March 31, 2024, and sold $694.6 million of available-for-sale debt securities during the three months ended March 31, 2023, the proceeds of which were immediately reinvested into additional debt securities. The realized gains and losses from those sales were immaterial. No credit or non-credit losses related to debt securities were recorded as of March 31, 2024 or 2023. As of March 31, 2024 and December 31, 2023, available-for-sale debt securities of $2.3 billion and $236.0 million, respectively, were in an unrealized loss position primarily due to unfavorable changes in interest rates subsequent to initial purchase. None of the available-for-sale debt securities held as of March 31, 2024 or December 31, 2023 were in a continuous unrealized loss position for greater than 12 months. The decline in fair value below amortized cost basis was not considered other than temporary as it is more likely than not that the Company will hold the securities until maturity or a recovery of the cost basis, and no credit-related impairment losses were recorded as of March 31, 2024 or December 31, 2023. All of the Company’s U.S. treasury securities had remaining contractual maturities due within one year as of March 31, 2024.
Equity Securities
Equity securities primarily consist of shares held in publicly-traded companies, which are recorded at fair market value each reporting period in marketable securities on the condensed consolidated balance sheets. Additionally, we have accepted, and may continue to accept, securities as noncash consideration. Total equity securities received as noncash consideration was $10.9 million and $8.7 million during the three months ended March 31, 2024 and 2023, respectively. Realized and unrealized gains and losses are recorded in other income (expense), net on the condensed consolidated statements of operations. For the three months ended March 31, 2024 and 2023, net unrealized losses from publicly-traded equity securities held at the end of each period were $10.9 million and $8.2 million, respectively.
The Company also holds equity securities in privately-held companies without readily determinable fair values that are recorded using the measurement alternative. As of March 31, 2024 and December 31, 2023, the total amount of privately-held equity securities included in other assets on the consolidated balance sheets was $35.1 million and $32.6 million, respectively. The Company classifies these fair value measurements as Level 3 within the fair value hierarchy. The Company did not record any material adjustments or impairments for the privately-held equity securities held for the three months ended March 31, 2024 and 2023.
Investments
From 2021 through 2022, the Company approved and entered into certain agreements (“Investment Agreements”) to purchase shares of various entities, including special purpose acquisition companies and/or other privately-held or publicly-traded entities (each, an “Investee,” and such purchases, the “Investments”). No Investments were purchased under such Investment Agreements during the three months ended March 31, 2024 or the fiscal year ended December 31, 2023.

In connection with signing the Investment Agreements, each Investee or an associated entity and the Company entered into a commercial contract for access to the Company’s products and services (collectively, the “Strategic Commercial Contracts”). The Company assessed the concurrent agreements under the noncash consideration and consideration payable to a customer guidance within Accounting Standards Codification 606, Revenue from Contracts with Customers, as well as the commercial substance of each arrangement considering the customer’s ability and intention to pay as well as the Company’s obligation to perform under each contract. The Company performs ongoing assessments of customers’ financial condition, including the consideration of customers’ ability and intention to pay, and whether all or some portion of the value of such contracts continue to meet the criteria for revenue recognition, among other factors. During the three months ended March 31, 2024 and 2023, revenue recognized from Strategic Commercial Contracts was $23.9 million and $33.4 million, respectively.
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
5. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
As of March 31, 2024As of December 31, 2023
Leasehold improvements$83,502 $83,139 
Computer equipment, software, and other53,969 50,844 
Furniture and fixtures13,920 13,834 
Construction in progress3,231 2,099 
Total property and equipment, gross154,622 149,916 
Less: accumulated depreciation and amortization(107,716)(102,158)
Total property and equipment, net$46,906 $47,758 
Depreciation and amortization expense related to property and equipment, net was $6.0 million and $5.9 million for the three months ended March 31, 2024 and 2023, respectively.
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
As of March 31, 2024As of December 31, 2023
Accrued payroll and related expenses$77,709 $83,094 
Accrued taxes34,014 47,257 
Accrued other liabilities94,311 92,640 
Total accrued liabilities$206,034 $222,991 
6. Debt
2014 Credit Facility
In October 2014, the Company entered into an unsecured revolving credit facility, which has been subsequently secured by substantially all of the Company’s assets and amended from time to time (as amended, the “2014 Credit Facility”). As of March 31, 2024, the Company had no outstanding debt balances and had undrawn revolving commitments of $500.0 million available to fund working capital and general corporate expenditures under the 2014 Credit Facility, which has a maturity date of March 31, 2027.
The 2014 Credit Facility contains customary representations and warranties, and certain financial and nonfinancial covenants, including but not limited to maintaining minimum liquidity of $50.0 million, and certain limitations on liens and indebtedness. The Company was in compliance with all covenants associated with the 2014 Credit Facility as of March 31, 2024.
7. Commitments and Contingencies
Purchase Commitments
The Company has commitments with various third parties to purchase cloud hosting services. In September 2023, the Company amended one of its third-party cloud hosting services agreements. Under this amendment, the Company has committed to spend at least $1.95 billion over ten contract years through September 30, 2033, as well as certain additional minimum usage commitments, among other things. As of March 31, 2024, the Company satisfied $90.5 million of its $154.0 million commitment for contract year three ending September 30, 2024. Additionally, as of March 31, 2024, there were no material changes outside the ordinary course of business to the Company’s commitments, as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023.
Litigation and Legal Proceedings
From time to time, third parties may assert patent infringement claims against the Company. In addition, from time to time, the Company may be subject to other legal proceedings and claims in the ordinary course of business, including claims of alleged
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
infringement of trademarks, copyrights, and other intellectual property rights; employment claims; securities claims; investor claims; corporate claims; class action claims; and general contract, tort, or other claims. The Company may from time to time also be subject to various legal or government claims, disputes, or investigations. Such matters may include, but not be limited to, claims, disputes, allegations, or investigations related to warranty; refund; breach of contract; breach, leak, or misuse of personal data or confidential information; employment; government procurement; intellectual property; government regulation or compliance (including but not limited to anti-corruption requirements, export or other trade controls, data privacy or data protection, cybersecurity requirements, or antitrust/competition law requirements); securities; investor; corporate; or other matters. The Company establishes an accrual for loss contingencies when the loss is both probable and reasonably estimable.
On September 15, 2022, October 25, 2022, and November 4, 2022, putative securities class action complaints were filed in the United States District Court for the District of Colorado, captioned Cupat v. Palantir Technologies Inc., et al., Case No. 1:22-cv-02384, Allegheny County Employees’ Retirement System v. Palantir Technologies, Inc., et al., Case No. 1:22-cv-02805, and Shijun Liu, Individually and as Trustee of the Liu Family Trust 2019 v. Palantir Technologies Inc., et al., Case No. 1:22-cv-02893, respectively, naming the Company and certain current and former officers and directors as defendants. The suits allege false and misleading statements about our business and prospects, and purport to allege claims under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Securities Act of 1933, as amended (the “Securities Act”), and seek unspecified damages and remedies under Sections 10(b), 20(a), and 20(A) of the Exchange Act and Sections 11 and 15 of the Securities Act. These three actions subsequently were consolidated as Cupat v. Palantir Technologies Inc., et al., Lead Civil Action No. 1:22-cv-02834-CNS-SKC, consolidated with civil actions 1:22-cv-02805-CNS-SKC and 1:22-cv-02893-CNS-SKC. On March 31, 2024, the Court dismissed the Cupat matter without prejudice. On November 21, 2022 and January 13, 2023, stockholder derivative actions were filed in the United States District Court for the District of Colorado, captioned Li v. Karp, et al., Case No. 22-cv-3028 and Parmenter v. Karp, et al., Case No. 23-cv-118, and on January 27, 2023, a stockholder derivative action was filed in the United States District Court for the District of Delaware captioned Miao v. Karp, et al., Case No. 1:23-cv-00103-MN, each against certain current and former officers and directors asserting breach of fiduciary duty and related claims relating to the allegations of the securities class action complaints and seek unspecified damages and injunctive remedies under Section 14(a) of the Exchange Act and Delaware law. On August 22, 2023, a stockholder derivative action was filed in the Court of Chancery of the State of Delaware captioned Central Laborers’ Pension Fund v. Karp, et al., Case No. 2023-0864 against certain current and former officers and directors asserting breach of fiduciary duty and related claims relating to the allegations of the securities class action complaints and seeks unspecified damages and injunctive relief under Delaware law. Because the litigation is in early stages, the Company is unable to estimate the reasonably possible loss or range of loss, if any, that may result from these matters. On November 20, 2023, the plaintiff in Parmenter v. Karp, et al., Case No. 23-cv-118, filed a Notice of Voluntary Dismissal. On November 28, 2023, the court terminated the Parmenter action accordingly.
As of March 31, 2024, the Company was not aware of any currently pending legal matters or claims, individually or in the aggregate, that were expected to have a material adverse impact on its condensed consolidated financial statements.
Warranties and Indemnification
The Company generally provides a warranty for its software products and services and a service level agreement (“SLA”) for the Company’s performance of software operations. The Company’s products are generally warranted to perform substantially as described in the associated product documentation during the subscription term or for a period of up to 90 days where the software is hosted by the customer, and the Company includes operations and maintenance (“O&M”) services as part of its subscription and license agreements to support this warranty and maintain the operability of the software. The Company’s services are generally warranted to be performed in a professional manner and by an adequate staff with knowledge about the products. In the event there is a failure of such warranties, the Company generally is obligated to correct the product or service to conform to the warranty provision, or, if the Company is unable to do so, the customer is entitled to seek a refund of the purchase price of the product and service (generally prorated over the contract term). Due to the absence of historical warranty claims, the Company’s expectations of future claims related to products under warranty continue to be insignificant. The Company has not recorded warranty expense or related accruals as of March 31, 2024 and December 31, 2023.
The Company generally agrees to indemnify its customers against legal claims that the Company’s software products infringe certain third-party intellectual property rights and accounts for its indemnification obligations. In the event of such a claim, the Company is generally obligated to defend its customer against the claim and to either settle the claim at the Company’s expense or pay damages that the customer is legally required to pay to the third-party claimant. In addition, in the event of an infringement, the Company generally agrees to secure the right for the customer to continue using the infringing product; to modify or replace the infringing product; or, if those options are not commercially practicable, to refund the cost of the software, as prorated over the period. To date, the Company has not been required to make any payment resulting from infringement claims asserted against its customers and does not believe that the Company will be liable for such claims in the
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
foreseeable future. As such, the Company has not recorded a liability for infringement costs as of March 31, 2024 and December 31, 2023.
The Company has obligations under certain circumstances to indemnify each of the defendant directors and certain officers against judgments, fines, settlements, and expenses related to claims against such directors and certain officers and otherwise to the fullest extent permitted under the law and the Company’s Amended and Restated Bylaws and Amended and Restated Certificate of Incorporation.
8. Stockholders’ Equity
The Company’s Class A, Class B, and Class F common stock (collectively, the “common stock”) all have the same rights, except with respect to voting and conversion rights. Class A and Class B common stock have voting rights of 1 and 10 votes per share, respectively. The Class F common stock has the voting rights generally described herein and each share of Class F common stock is convertible at any time, at the option of the holder thereof, into one share of Class B common stock. All shares of Class F common stock are held in a voting trust established by Stephen Cohen, Alexander Karp, and Peter Thiel (the “Founders”). The Class F common stock generally gives the Founders the ability to control up to 49.999999% of the total voting power of the Company’s capital stock, so long as the Founders and certain of their affiliates collectively meet a minimum ownership threshold, which was 100.0 million of the Company's equity securities as of March 31, 2024.
Holders of the common stock are entitled to dividends when, as, and if declared by the Company’s Board of Directors, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends. No dividends have been declared as of March 31, 2024.
The following represented the total authorized, issued, and outstanding shares for each class of common stock (in thousands):
As of March 31, 2024As of December 31, 2023
AuthorizedIssued and OutstandingAuthorizedIssued and Outstanding
Class A Common Stock20,000,000 2,130,393 20,000,000 2,096,982 
Class B Common Stock2,700,000 95,565 2,700,000 102,141 
Class F Common Stock1,005 1,005 1,005 1,005 
Total22,701,005 2,226,963 22,701,005 2,200,128 
Share Repurchase Program
In August 2023, the Company’s Board of Directors authorized a stock repurchase program of up to $1.0 billion of the Company’s outstanding shares of Class A common stock (the “Share Repurchase Program”). The Company may repurchase shares of its Class A common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act in accordance with applicable securities laws and other restrictions. The timing and the amount of stock repurchases under the Share Repurchase Program will be determined by the Company’s management, based on its evaluation of factors including business and market conditions, corporate and regulatory requirements, and other considerations. The Share Repurchase Program does not obligate the Company to repurchase any specific number of shares and may be discontinued at any time.
During the three months ended March 31, 2024, the Company repurchased and subsequently retired 0.4 million shares of its Class A common stock for an aggregate amount, including commissions, of $9.0 million under the Share Repurchase Program.
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
9. Stock-Based Compensation
Stock Options and SARs
The following table summarizes stock option and SAR activity for the three months ended March 31, 2024 (in thousands, except per share amounts and years):
Options OutstandingSARs Outstanding
Number of Awards
Weighted-Average Exercise Price Per Share
Weighted-Average
Remaining Contractual Life (years)
Aggregate Intrinsic Value
Number of Awards
Weighted-Average Exercise Price Per Share
Weighted-Average
Remaining Contractual Life (years)
Aggregate Intrinsic Value
Balance as of December 31, 2023278,470 $8.62 7.6$2,381,172  $ 0.0$ 
Granted
  44,283 50.00 
Exercised(17,482)4.80   
Canceled and forfeited(459)5.91 (899)50.00 
Balance as of March 31, 2024260,529 $8.88 7.5$3,681,164 43,384 $50.00 39.8$ 
Vested and exercisable as of March 31, 2024148,070 $7.02 6.9$2,368,058  $ 0.0$ 
As of March 31, 2024, the total unrecognized stock-based compensation expense related to options and SARs outstanding was $573.7 million and $137.9 million, respectively, which is expected to be recognized over a weighted-average service period of seven years and five years, respectively.
During the three months ended March 31, 2024, the Company granted SARs that vest upon the achievement of a market-based vesting condition subject to continued service. The market-based vesting condition is satisfied when the price per share of the Company’s Class A common stock exceeds $50 (measured based on the closing price on the immediately prior trading day) (an “Above Price Day”). Following vesting, SARs may only be exercised on an Above Price Day which occurs within an open trading window. The maximum appreciation is up to $20 per SAR.
The Company determined the grant date fair value of SARs using a Monte Carlo simulation model which incorporates various assumptions including the contractual term, expected stock price volatility, risk-free interest rate, suboptimal exercise factor, annual post-vest termination rate, and cost of capital as of the grant date.
For the awards granted during the three months ended March 31, 2024, the assumptions used in the Monte Carlo simulation model were as follows:
March 31, 2024
Expected volatility rate58.9%
Risk-free interest rate4.1%
Grant-date fair value per share
$3.30 - $3.50
The expected volatility rate is based on a combination of the Company’s implied volatility and the historical volatility of comparable publicly-traded companies. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The derived service period for the SARs granted during the three months ended March 31, 2024 was five years.

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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
RSUs and P-RSUs
The following table summarizes the RSU and P-RSU activity for the three months ended March 31, 2024 (in thousands, except per share amounts):
RSUs OutstandingWeighted Average Grant Date Fair Value per ShareP-RSUs OutstandingWeighted Average Grant Date Fair Value per Share
Unvested and outstanding as of December 31, 202382,262 $10.71 1,976 $15.39 
Granted1,601 17.30 1,623 16.75 
Vested(8,518)12.97 (1,551)17.59 
Canceled and forfeited(1,371)13.43 (49)16.75 
Adjustment for performance achievement(1)
  (39)7.38 
Unvested and outstanding as of March 31, 202473,974 $10.54 1,960 $14.90 
—————
(1) This amount represents the difference between the maximum number of shares that could have been issued under the grant and the actual number of shares earned based on final performance.

As of March 31, 2024, the total unrecognized stock-based compensation expense related to the RSUs outstanding was $490.5 million, which the Company expects to recognize over a weighted-average service period of three years. As of March 31, 2024, there was no unrecognized stock-based compensation expense related to the P-RSUs outstanding.
Stock-based Compensation Expense
Total stock-based compensation expense was as follows (in thousands):
Three Months Ended March 31,
20242023
Cost of revenue$10,416 $9,177 
Sales and marketing42,156 39,535 
Research and development26,874 19,924 
General and administrative46,205 46,078 
Total stock-based compensation expense$125,651 $114,714 
10. Income Taxes
The Company recorded a provision for income taxes of $4.7 million and $1.7 million for the three months ended March 31, 2024 and 2023, respectively. The Company is subject to income tax in the U.S. as well as other tax jurisdictions in which it conducts business. The Company’s effective tax rate as of March 31, 2024 differs from the U.S. statutory rate primarily due to foreign income taxed at different rates, non-deductible stock-based compensation, other non-deductible expenses, and valuation allowances recorded on its deferred tax assets from the U.S., United Kingdom (“U.K.”), and other jurisdictions. The provision for income taxes increased by $3.0 million for the three months ended March 31, 2024 compared to the same period in 2023 primarily related to higher foreign income taxes as the result of higher foreign taxable income and higher withholding taxes in the current year.

The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. The Company assesses its ability to realize the deferred tax assets on a quarterly basis, and it establishes a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. The Company weighs all available positive and negative evidence, including its earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. For example, due to the weight of objectively verifiable negative evidence, including its history of U.S. and U.K. net operating tax losses, the Company believes that it is more likely than not that its U.S. and U.K. deferred tax assets will not be fully realized. Accordingly, the Company has maintained a full valuation allowance on its U.S. and U.K. deferred tax assets as of March 31, 2024.
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
On August 16, 2022, the Inflation Reduction Act was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on the value of net share repurchases. The Inflation Reduction Act became effective beginning in fiscal year 2023. Based on the Company’s current analysis of the provisions, the law has not had a material impact on the Company’s condensed consolidated financial statements.
11. Net Earnings Per Share Attributable to Common Stockholders
The following table presents the calculation of basic and diluted net earnings per share attributable to common stockholders (in thousands, except per share amounts):
Three Months Ended March 31,
20242023
Numerator
Net income attributable to common stockholders for diluted net earnings per share$105,530 $16,802 
Denominator
Weighted-average shares used in computing net earnings per share:
Basic2,213,545 2,107,780 
Effect of dilutive shares186,562 109,659 
Diluted2,400,107 2,217,439 
Net earnings per share
Net earnings per share attributable to common stockholders:
Basic$0.05 $0.01 
Diluted$0.04 $0.01 
The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net earnings per share attributable to common stockholders for the periods presented due to their anti-dilutive effect (in thousands):
Three Months Ended March 31,
20242023
Options issued and outstanding 162,521 
RSUs and P-RSUs outstanding3,500 23,006 
Warrants to purchase common stock 13,042 
Total3,500 198,569 
For the three months ended March 31, 2024, the Company also excluded the impact of 43.4 million SARs that may settle in shares of Class A common stock from the computation of diluted net earnings per share because the exercise price of such SARs was greater than the average market price of the Class A common stock for the applicable period. When such SARs are vested, the maximum number of potentially dilutive Class A common shares is the fraction that equals the maximum appreciation divided by the Company’s Class A common stock price at that time.
12. Segment and Geographic Information
The following reporting segment tables reflect the results of the Company’s reportable operating segments consistent with the manner in which the chief operating decision maker (“CODM”) evaluates the performance of each segment and allocates the Company’s resources. The CODM does not evaluate the performance of the Company’s assets on a segment basis for internal management reporting and, therefore, such information is not presented.
Contribution is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. A segment’s contribution is calculated as segment revenue less the related costs of revenue and sales and marketing expenses. It excludes certain operating expenses that are not allocated to segments because they are separately managed at the consolidated corporate level or are noncash costs. These unallocated and noncash costs include stock-based compensation expense, research and development expenses, and general and administrative expenses.
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Financial information for each reportable segment was as follows (in thousands):
Three Months Ended March 31,
20242023
Revenue:
Government$335,373 $289,070 
Commercial298,965 236,116 
Total revenue$634,338 $525,186 
Three Months Ended March 31,
20242023
Contribution:
Government$199,388 $166,233 
Commercial178,089 112,927 
Total contribution$377,477 $279,160 
The reconciliation of contribution to income (loss) from operations is as follows (in thousands):
Three Months Ended March 31,
20242023
Income from operations$80,881 $4,115 
Research and development expenses (1)
83,166 70,176 
General and administrative expenses (1)
87,779 90,155 
Total stock-based compensation expense125,651 114,714 
Total contribution$377,477 $279,160 
—————
(1) Excludes stock-based compensation expense.
Geographic Information
Revenue by geography is based on the customer’s headquarters or agency location at the time of sale. Revenue is as follows (in thousands, except percentages):
Three Months Ended March 31,
20242023
Amount%Amount%
Revenue:
United States$406,389 64 %$336,845 64 %
Rest of world (1)
227,949 36 %188,341 36 %
Total revenue$634,338 100 %$525,186 100 %
—————
(1) No other country represents 10% or more of total revenue for the three months ended March 31, 2024 or 2023.
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Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
13. Intangible Assets
Intangible assets subject to amortization that are not fully amortized are as follows (in thousands, except years):
Weighted average useful life (years)
As of March 31, 2024As of December 31, 2023
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Customer relationships3.6$10,400 $(2,947)$7,453 $10,400 $(2,427)$7,973 
Reacquired rights5.617,618 (3,565)14,053 17,618 (2,936)14,682 
Backlog0.66,700 (4,746)1,954 6,700 (3,908)2,792 
Other0.04,225 (4,192)33 4,225 (3,770)455 
Total intangible assets$38,943 $(15,450)$23,493 $38,943 $(13,041)$25,902 
Amortization expense of intangible assets was not material for the three months ended March 31, 2024 or 2023.
As of March 31, 2024, expected amortization expense for the unamortized finite-lived intangible assets is as follows (in thousands):
Year ended December 31,
Amount
Remainder of 2024$5,435 
20254,597 
20264,597 
20274,250 
20282,517 
Thereafter2,097 
Total$23,493 
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “can,” “would,” “intend,” “target,” “goal,” “outlook,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “future,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our expectations regarding financial performance and liquidity, including but not limited to our expectations regarding revenue, cost of revenue, operating expenses, stock-based compensation, our ability to achieve and maintain future profitability, and cash flows;
our ability to successfully execute our business and growth strategy;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
the demand for our platforms in general;
our ability to increase our number of customers and revenue generated from customers;
our expectations regarding the future contribution margin of our existing and future customers;
our expectations regarding our ability to quickly and effectively integrate our platforms for our existing and future customers;
our ability to develop new platforms, and enhancements to existing platforms, and bring them to market in a timely manner;
our market share, category positions, and market trends, including our ability to grow our business in large government and commercial organizations, including our expectations regarding the impact of Federal Acquisition Streamlining Act of 1994 (“FASA”);
our ability to compete with existing and new competitors in existing and new markets and products;
our expectations regarding anticipated technology needs and developments and our ability to address those needs and developments with our platforms;
our expectations regarding litigation and legal and regulatory matters;
our expectations regarding our ability to meet existing performance obligations and maintain the operability of our products;
our expectations regarding the effects of existing and developing laws and regulations, including with respect to taxation, privacy, data protection, cybersecurity, and artificial intelligence (“AI”);
our expectations regarding new and evolving markets, such as AI;
our ability to develop and protect our brand;
our ability to maintain the security and availability of our platforms;
our expectations and management of future growth;
our expectations concerning relationships with third parties, including our customers, equity method investment partners, and vendors;
our expectations regarding our investments in, and enterprise agreements with, various entities, including special purpose acquisition companies and/or other privately-held or publicly-traded entities;
our ability to maintain, protect, and enhance our intellectual property;
our expectations regarding the amount, timing, and manner of any stock repurchases;
our expectations regarding our multi-class stock and governance structure and the benefits thereof;
our expectations regarding macroeconomic conditions, including global political and economic uncertainty, heightened interest rates, or monetary policy changes;
the impacts of catastrophic events, including natural disasters, global pandemics, geopolitical tensions, terrorism, or other events beyond our control, on our and our customers’, vendors’, and partners’ respective businesses and the markets in which we and our customers, vendors, and partners operate;
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the impacts of the volatility and fluctuations in currency exchange rates, including an increase in the strength of the United States (“U.S.”) dollar, on the costs of our products outside of the United States and on customer demand; and
the increased expenses associated with being a public company.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on any forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in such forward-looking statements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, restructurings, joint ventures, partnerships, channel sales relationships, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
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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”). Gotham and Foundry enable institutions to transform massive amounts of information into an integrated data asset that reflects their operations, and AIP leverages the power of our existing machine learning technologies alongside large language models (“LLMs”) directly within Gotham and/or Foundry to help connect AI to enterprise data. 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 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.
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.
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 March 31, 2024, we generated $634.3 million in revenue, reflecting a 21% growth rate from the three months ended March 31, 2023, when we generated $525.2 million in revenue.
In the three months ended March 31, 2024, we generated income from operations of $80.9 million, or adjusted income from operations of $226.5 million when excluding stock-based compensation and related employer payroll taxes. In the three months ended March 31, 2023, we generated income from operations of $4.1 million, or adjusted income from operations of $125.1 million when excluding stock-based compensation and related employer payroll taxes.
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In the three months ended March 31, 2024, our gross profit was $518.1 million, reflecting a gross margin of 82%, or 83% when excluding stock-based compensation. In the three months ended March 31, 2023, our gross profit was $417.5 million, reflecting a gross margin of 80%, or 81% 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 March 31, 2024, we had 554 customers, including companies in various commercial sectors and government agencies around the world. During the period ended March 31, 2023, we had 391 customers.
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/or 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 March 31, 2024 was $55.5 million, which grew 9% from an average of $50.9 million in revenue from the top twenty customers during the trailing twelve months ended March 31, 2023, 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 three months ended March 31, 2024, 53% of our revenue came from government customers and 47% came from commercial customers.
Our U.S. customers have been a meaningful source of revenue growth for our business. In the three months ended March 31, 2024, we generated 64% of our revenue from customers in the United States and the remaining 36% from non-U.S. customers. Revenue from our U.S. customers during the trailing twelve months ended March 31, 2024 was $1.4 billion, which grew 18% 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 and resilient source of revenue for our business, particularly during periods of economic uncertainty. However, large government customers, in particular, are generally subject to a number 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.
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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, heightened interest rates, monetary policy changes, and foreign currency fluctuations. Additionally, these macroeconomic impacts have disrupted, and may continue to disrupt, the operations of our customers and prospective customers. 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 and Israel 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. In 2023, we announced partnerships with Ukraine to support its defense and reconstruction efforts and investigations of potential war crimes, among other activities. In 2024, we agreed to a strategic partnership with the Israeli Defense Ministry to supply technology to Israel to assist in the ongoing war. However, our current operations related to Ukraine and Israel 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, the general strengthening of the U.S. dollar relative to other major foreign currencies (primarily the Euro and British pound sterling (“GBP”)) 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 U.S. dollars. 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”), Euro, 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 three months ended March 31, 2024 such impacts were not material to our financial position or results of operations.
Customer Impacts
Current macroeconomic conditions have impacted, and may continue to adversely impact, our customers’ businesses, particularly our early- and growth-stage customers. Relationships with early- or growth-stage customers carry inherent risks because, among other things, such customers may be unable to generate sufficient revenues or profitability or to access any necessary financing or funding in a timely manner or on favorable terms to them in the current macroeconomic environment, which has impacted, and may continue to impact, our expected revenue and collections. As a result, current macroeconomic conditions have impacted, and may continue to impact, our ability to realize the full value of our commercial contracts with such early- or growth-stage customers. For additional information, see Note 4. Investments and Fair Value Measurements in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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.
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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.
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.
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Contribution Margin
The following table provides a reconciliation of contribution margin for the three months ended March 31, 2024 and 2023 (in thousands, except percentages):
Three Months Ended March 31,
20242023
Income from operations$80,881 $4,115 
Add:
Research and development expenses (1)
83,166 70,176 
General and administrative expenses (1)
87,779 90,155 
Total stock-based compensation expense125,651 114,714 
Total contribution$377,477 $279,160 
Contribution margin60 %53 %
————
(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 months ended March 31, 2024 and 2023 (in thousands, except percentages):
Three Months Ended March 31,
20242023
Gross profit$518,082 $417,541 
Add: stock-based compensation10,416 9,177 
Gross profit, excluding stock-based compensation$528,498 $426,718 
Gross margin, excluding stock-based compensation83 %81 %
Adjusted Income from Operations
The following table provides a reconciliation of adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
20242023
Income from operations$80,881 $4,115 
Add: stock-based compensation125,651 114,714 
Add: employer payroll taxes related to stock-based compensation19,926 6,285 
Adjusted income from operations$226,458 $125,114 
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.
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On-Premises Software
Sales of our software subscriptions 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 subscriptions 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. These services are typically coterminous with a Palantir Cloud or On-Premises Software subscriptions. Professional services are on-demand, whereby we perform services throughout the contract period; therefore, the revenue is recognized over the contractual 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 field-service representatives, third-party cloud hosting services, hardware costs, travel costs, allocated overhead, 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, including bootcamps, and customer growth activities; as well as third-party cloud hosting services for our pilots, marketing and sales event-related costs, travel costs, and allocated overhead. Sales and marketing costs are generally expensed as incurred.
We expect that sales and marketing expenses will increase in absolute dollars 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, travel costs, and allocated overhead. Research and development costs are expensed as incurred.
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, travel costs, and allocated overhead.
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.
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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 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.
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Results of Operations
The following table summarizes our condensed consolidated statements of operations data (in thousands):
Three Months Ended March 31,
20242023
Revenue$634,338 $525,186 
Cost of revenue
116,256 107,645 
Gross profit518,082 417,541 
Operating expenses:
Sales and marketing
193,177 187,093 
Research and development
110,040 90,100 
General and administrative
133,984 136,233 
Total operating expenses437,201 413,426 
Income from operations
80,881 4,115 
Interest income43,352 20,853 
Other income (expense), net(13,507)(4,136)
Income before provision for income taxes
110,726 20,832 
Provision for income taxes4,655 1,681 
Net income
106,071 19,151 
Less: Net income attributable to noncontrolling interests541 2,349 
Net income attributable to common stockholders
$105,530 $16,802 

The following table sets forth the components of our condensed consolidated statements of operations data as a percentage of revenue:
Three Months Ended March 31,
20242023
Revenue100 %100 %
Cost of revenue18 20 
Gross margin82 80 
Operating expenses:
Sales and marketing31 36 
Research and development17 17 
General and administrative21 26 
Total operating expenses69 79 
Income from operations13 
Interest income
Other income (expense), net(2)(1)
Income before provision for income taxes18 
Provision for income taxes— 
Net income17 %%
Less: Net income attributable to noncontrolling interests— 
Net income (loss) attributable to common stockholders17 %%
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Comparison of the Three Months Ended March 31, 2024 and 2023
Revenue
Three Months Ended March 31,Change
20242023Amount%
Revenue:
Government$335,373 $289,070 $46,303 16 %
Commercial298,965 236,116 62,849 27 %
Total revenue$634,338 $525,186 $109,152 21 %
Revenue increased by $109.2 million, or 21%, for the three months ended March 31, 2024 compared to the same period in 2023. Revenue from government customers increased by $46.3 million, or 16%, for the three months ended March 31, 2024 compared to the same period in 2023. Of the increase, $41.9 million was from existing government customers as of December 31, 2023. Generally, increases in revenue from our existing customers are related to increased adoption of our products and services within their organizations. Revenue from U.S. government customers was $256.7 million for the three months ended March 31, 2024 compared to $229.8 million for the same period in 2023. Revenue from commercial customers increased by $62.8 million, or 27%, for the three months ended March 31, 2024 compared to the same period in 2023. Of the increase, $49.5 million was from existing customers as of December 31, 2023, which includes an offsetting decrease of $9.5 million of revenue from Strategic Commercial Contracts. For additional information, see Note 4. Investments and Fair Value Measurements in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Revenue from U.S. commercial customers was $149.7 million for the three months ended March 31, 2024 compared to $107.1 million for the same period in 2023, a 40% increase.
Cost of Revenue and Gross Profit
Three Months Ended March 31,Change
20242023Amount%
Cost of revenue$116,256 $107,645 $8,611 %
Gross profit$518,082 $417,541 $100,541 24 %
Gross margin82 %80 %%
Cost of revenue for the three months ended March 31, 2024 increased by $8.6 million, or 8%, compared to the same period in 2023. The increase was primarily due to increases of $6.5 million in third-party cloud hosting services, $3.7 million in field service representatives and other direct costs, and $3.2 million for stock-based compensation expense and related expenses. These increases were partially offset by a decrease of $4.2 million in hardware. For additional information related to stock-based compensation expense, see the section titled “Stock-Based Compensation” below.
Our gross margin for the three months ended March 31, 2024 increased from 80% for the same period in 2023 to 82% as a result of revenue growth outpacing costs of revenue. The primary cause of this growth rate variation was due to decreases in hardware in cost of revenue and lower growth in third-party cloud hosting relative to revenue growth as compared to the prior year.
Operating Expenses
Three Months Ended March 31,Change
20242023Amount%
Sales and marketing$193,177 $187,093 $6,084 %
Research and development110,040 90,100 19,940 22 %
General and administrative133,984 136,233 (2,249)(2)%
Total operating expenses$437,201 $413,426 $23,775 %
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Sales and Marketing
Sales and marketing expenses increased by $6.1 million, or 3%, for the three months ended March 31, 2024 compared to the same period in 2023. The increase was primarily due to increases of $7.5 million in stock-based compensation expense and related expenses and $4.8 million in variable compensation, including commissions. These increases were partially offset by decreases of $5.9 million in payroll and other payroll-related costs driven by a decrease in headcount attributable to our sales and marketing function. For additional information related to stock-based compensation expense, see the section titled “Stock-Based Compensation” below.
Research and Development
Research and development expenses increased by $19.9 million, or 22%, for the three months ended March 31, 2024 compared to the same period in 2023. The increase was primarily due to increases of $11.1 million in stock-based compensation expense and related expenses, $4.7 million in third-party cloud hosting services, and $4.4 million in payroll and other payroll-related costs driven by an increase in headcount attributable to our research and development function. For additional information related to stock-based compensation expense, see the section titled “Stock-Based Compensation” below.
General and Administrative
General and administrative expenses decreased by $2.2 million, or 2%, for the three months ended March 31, 2024 compared to the same period in 2023. The decrease was primarily due to a decrease of $2.7 million in professional services and $2.6 million in payroll and other payroll-related costs driven by a decrease in headcount attributable to our general and administrative functions. The decrease was partially offset by an increase of $2.8 million in stock-based compensation expense and related expenses. For additional information related to stock-based compensation expense, see the section titled “Stock-Based Compensation” below.
Stock-Based Compensation
Three Months Ended March 31,Change
20242023Amount%
Cost of revenue$10,416 $9,177 $1,239 14 %
Sales and marketing42,156 39,535 2,621 %
Research and development26,874 19,924 6,950 35 %
General and administrative46,205 46,078 127 — %
Total stock-based compensation expense$125,651 $114,714 $10,937 10 %
Stock-based compensation expenses increased by $10.9 million, or 10%, for the three months ended March 31, 2024 compared to the same period in 2023. The increase was driven by expense from new grants awarded since March 31, 2023, including RSUs, P-RSUs, and SARs, partially offset by lower expense under the accelerated attribution method for restricted stock units (“RSUs”) granted prior to September 30, 2020, the date of our direct listing, and the vesting and cancellation of options and RSUs.
Interest Income
Three Months Ended March 31,Change
20242023Amount
Interest income$43,352 $20,853 $22,499 
Interest income increased by $22.5 million for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to higher U.S. interest rates and increases in our interest-bearing cash and cash equivalents, and our investments in short-term U.S. treasury securities.
Other Income (Expense), Net
Three Months Ended March 31,Change
20242023Amount
Other income (expense), net$(13,507)$(4,136)$(9,371)
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Other income (expense), net changed by $9.4 million for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to an increase in net realized and unrealized losses from our shares held in equity securities.
Provision for Income Taxes
Three Months Ended March 31,Change
20242023Amount
Provision for income taxes$4,655 $1,681 $2,974 
Provision for income taxes increased by $3.0 million for the three months ended March 31, 2024 compared to the same period in 2023 primarily related to higher foreign income taxes as the result of higher foreign taxable income.
Liquidity and Capital Resources
We generated positive cash flow from operations for the three months ended March 31, 2024. We had cash, cash equivalents, and short-term U.S. treasury securities totaling $3.9 billion available as of March 31, 2024. We believe that cash flows generated from operations, cash, cash equivalents, marketable securities, available funds, and access to financing sources, including our credit facility, will be sufficient to meet our anticipated operating cash needs for at least the next twelve months. However, any projections of future cash needs and cash flows are subject to substantial uncertainty. While we have generated income from operations and positive cash flows from operations for the three months ended March 31, 2024, the amounts may fluctuate for the foreseeable future.
As of March 31, 2024, our accumulated deficit balance was $5.5 billion, and our principal sources of liquidity were cash, cash equivalents, and short-term U.S. treasury securities totaling $3.9 billion.
As of March 31, 2024, we had no outstanding debt balances and additional available and undrawn revolving commitments of $500.0 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.
In August 2023, the Company’s Board of Directors authorized a stock repurchase program of up to $1.0 billion of the Company’s outstanding shares of Class A common stock (the “Share Repurchase Program”). The Company has and may continue to repurchase shares of its Class A common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act in accordance with applicable securities laws and other restrictions. The timing and the amount of stock repurchases under the Share Repurchase Program will be determined by the Company’s management, based on its evaluation of factors including business and market conditions, corporate and regulatory requirements, and other considerations. The Share Repurchase Program does not obligate the Company to repurchase any specific number of shares and may be discontinued at any time.
During the three months ended March 31, 2024, the Company repurchased and subsequently retired 0.4 million shares of its Class A common stock for an aggregate amount, including commissions, of $9.0 million under the Share Repurchase Program.
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; additionally, we have, and may in the future, repurchase shares of our Class A common stock from time to time under our Share Repurchase Program. As such, we may be required to seek additional equity or debt financing. 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. For additional information on our Share Repurchase Program, see Note 8. Stockholders’ Equity in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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The following table summarizes our cash flows for the periods indicated (in thousands):
Three Months Ended March 31,
20242023
Net cash provided by (used in):
Operating activities$129,579 $187,376 
Investing activities(511,245)(1,554,591)
Financing activities75,248 25,983 
Effect of foreign exchange on cash, cash equivalents, and restricted cash
(4,024)2,676 
Net increase (decrease) in cash, cash equivalents, and restricted cash
$(310,442)$(1,338,556)
Operating Activities
Net cash provided by operating activities was $129.6 million and $187.4 million for the three months ended March 31, 2024 and 2023, respectively. The decrease was primarily driven by timing of payments to vendors and timing of the receipt of payments from our customers, partially offset by an increase in interest income.
Investing Activities
Net cash used in investing activities was $0.5 billion and $1.6 billion for the three months ended March 31, 2024 and 2023, respectively. The decrease in cash used in investing activities was primarily due to purchases of marketable securities, primarily comprised of short-term U.S. treasury securities, partially offset by proceeds from sales and redemptions of marketable securities.
Financing Activities
Net cash provided by financing activities was $75.2 million and $26.0 million for the three months ended March 31, 2024 and 2023, respectively, each of which primarily consisted of proceeds from the exercise of common stock options partially offset by share repurchases of $9.0 million.
Contractual Obligations and Commitments
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. For additional information, refer to Note 7. Commitments and Contingencies to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Except as already disclosed in Note 7. Commitments and Contingencies in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there has been no material change in our contractual obligations and commitments other than in the ordinary course of business since our fiscal year ended December 31, 2023. See our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 20, 2024, for additional information regarding the Company’s contractual obligations.
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, 2023, which was filed with the SEC on February 20, 2024, 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.

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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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks in the ordinary course of our business, which primarily relate to fluctuations in the value of our investments, interest rates, foreign currency exchange, and inflation.
Market Risk
As of March 31, 2024, we held outstanding shares of publicly-traded equity securities valued at $8.7 million. We have sold, and may continue to sell, some or all of such equity securities. These equity securities are often in early- or growth-stage companies that have minimal public trading history; as such the fair value of these equity securities, and the value of our equity holdings, may fluctuate depending on the financial outcome and prospects of the issuers, as well as global market conditions including recent and ongoing volatility related to the ongoing Russia-Ukraine and Israel conflicts, and heightened interest rates.
As of March 31, 2024, we held outstanding shares of privately-held equity securities valued at $35.1 million. Valuations of our privately-held equity securities are complex due to, among other things, the lack of liquidity and the lack of readily available market data. Uncertainties in the global economic climate and financial markets, or in the business, financial results, or conditions of companies we hold equity in, could adversely impact the valuations of such companies and, therefore, result in an impairment or downward adjustment in the value of our holdings.
We have and may continue to accept securities as consideration or invest in securities, which may contribute to additional volatility to our condensed consolidated statements of operations.
Interest Rate Risk
Our cash, cash equivalents, restricted cash, and available-for-sale debt securities consist of cash, short-term U.S. treasury securities, money market funds, and certificates of deposit. The primary objective of our investment activities and strategies are focused on the preservation of capital and supporting our liquidity requirements.
Due to the short-term nature of the financial instruments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.
Foreign Currency Exchange Risk
Our contracts with customers are primarily denominated in U.S. dollars, with the remaining denominated in foreign currencies. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the United States, United Kingdom, and other European countries. Our results of current and future operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in JPY, Euro, and GBP. We have experienced, and may continue to experience, fluctuations in net income as a result of transaction gains or losses related to remeasuring certain asset and liability balances that are denominated in foreign currencies. These exposures may change over time as business practices evolve and economic conditions change. To date, foreign currency transaction gains and losses have not been material to our condensed consolidated financial statements, and we have not engaged in any foreign currency hedging transactions.
Inflation Risk
We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, or results of operations.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
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Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were, in design and operation, effective at a reasonable assurance level.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are subject to legal proceedings and claims arising in the ordinary course of business. Based on our current knowledge, we believe that the amount or range of reasonably possible losses will not, either individually or in the aggregate, have a material adverse effect on our business, results of operations, or financial condition.
The results of any litigation cannot be predicted with certainty, and an unfavorable resolution in any legal proceedings could materially affect our future business, results of operations, or financial condition. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
For information on legal proceedings, refer to Note 7. Commitments and ContingenciesLitigation and Legal Proceedings in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and accompanying notes, before making a decision to invest in our Class A common stock. Our business, financial condition, results of operations, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. If any of the risks actually occur, our business, financial condition, results of operations, and prospects could be adversely affected. In that event, the trading price of our Class A common stock could decline, and you could lose part or all of your investment.
Risk Factor Summary
Our business is subject to numerous risks and uncertainties that you should consider before investing in our Class A common stock. These risks are described more fully below and include, but are not limited to, risks relating to the following:
until recent quarters, we had a history of incurring net losses, and we anticipate our operating expenses will continue to increase and we may not be able to achieve or maintain profitability in the future;
we may not be able to sustain our revenue growth;
our sales efforts involve considerable time and expense and our sales cycle is often long and unpredictable;
a limited number of customers account for a substantial portion of our revenue;
our results of operations and our key business measures are likely to fluctuate significantly on a quarterly basis;
seasonality may cause fluctuations in our results of operations and financial position;
our platforms are complex and may have a lengthy implementation process;
we may not successfully develop and deploy new technologies (such as technologies incorporating AI) to address the needs of our customers;
our platforms must operate with third-party products and services;
we may be unable to hire, retain, train, and motivate qualified personnel and senior management and deploy our personnel and resources to meet customer demand;
we may be unable to successfully build, expand, and deploy our marketing and sales organization;
we may not be able to maintain and enhance our brand and reputation;
unfavorable news or social media coverage may harm our reputation and business;
exclusive arrangements or unique terms with customers or partners may result in significant risks or liabilities to us;
we face intense competition in our markets;
we may be unable to maintain or properly manage our culture as we grow;
we may not enter into relationships with potential customers if we consider their activities to be inconsistent with our organizational mission or values;
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joint ventures, channel sales relationships, platform partnerships, and strategic alliances may be unsuccessful;
we may not be successful in executing our strategy to increase our sales to larger customers;
breach of the systems of any third parties upon which we rely, our customers’ systems, locations, or environments, or our internal systems or unauthorized access to data;
the market for our platforms and services may develop more slowly than we expect;
we have made and may continue to make strategic investments to support key business initiatives, including in privately-held and publicly-traded companies, as well as alternative investments, and we may not realize a return on these investments;
issues raised by the use of AI (including machine learning and large language models) in our platforms and business may result in reputational harm or liability;
we depend on computing infrastructure of third parties and they may experience errors, disruption, performance problems, or failure;
we may fail to adequately obtain, maintain, protect, and enforce our intellectual property and other proprietary rights;
we may be subject to intellectual property rights claims;
there may be real or perceived errors, failures, defects, or bugs in our platforms;
we rely on the availability of third-party technology that may be difficult to replace or that may cause errors;
our business is subject to complex and evolving U.S. and non-U.S. laws and regulations regarding privacy, data protection and security, technology protection, and other matters;
our non-U.S. sales and operations subject us to additional risks and regulations;
we may encounter unfavorable outcomes in legal, regulatory, and administrative inquiries and proceedings;
we may fail to receive and maintain government contracts or there may be changes in the contracting or fiscal policies of the public sector;
many of our customer contracts may be terminated by the customer at any time for convenience and may contain other provisions permitting the customer to discontinue contract performance;
we may not realize the full deal value of our customer contracts;
there may be a decline in the U.S. and other government budgets, changes in spending or budgetary priorities, or delays in contract awards;
there are no guarantees that our Share Repurchase Program (as defined below) will result in increased shareholder value; and
the multi-class structure of our common stock, the Founder Voting Trust Agreement, and the Founder Voting Agreement concentrate voting power with certain stockholders, in particular, Stephen Cohen, Alexander Karp, and Peter Thiel (our “Founders”) and their affiliates.
Risks Related to Our Business and Industry
Until recent quarters, we had a history of incurring net losses, and we anticipate our operating expenses will continue to increase and we may not be able to achieve or maintain profitability in the future.
Although we have achieved GAAP profitability in recent quarters, we incurred net losses in each period from our inception through the third quarter of 2022. We may not achieve or maintain profitability in future periods or, if we are profitable, we may not fully achieve our profitability targets. In addition, while we remain focused on operating efficiently, we anticipate that our operating expenses will continue to increase in the future. As we continue to expand our business, industry verticals, and the breadth of our operations, upgrade our infrastructure, hire additional employees, expand into new markets, invest in research and development, invest in sales and marketing, including expanding our sales organization and related sales-based payments that may come with such expansion, lease more real estate to accommodate our anticipated future growth, and incur costs associated with general administration, including expenses related to being a public company, we expect that our costs of revenue and operating expenses will continue to increase. To the extent we are successful in increasing our customer base, we may also incur increased expenses or losses because the costs associated with acquiring and growing our customers and with research and development are generally incurred upfront, while our revenue from customer contracts is generally recognized over the contract term. Furthermore, our sales model has historically required us to spend months and invest significant resources working with customers on pilot deployments at no or low cost to them. Though we have begun to integrate shorter,
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more cost-effective programs such as bootcamps, these initial deployments (including bootcamps) may result in no or minimal future revenue. We may also encounter unforeseen or unpredictable factors, including adverse macroeconomic conditions, unforeseen operating expenses, or other complications or delays, which may result in increased costs, or cause us to generate less revenue from our customers than we anticipated. We may not be able to continue to increase our revenue at a rate sufficient to offset increases in our costs of revenue and operating expenses in the near term or at all, which would prevent us from achieving or maintaining profitability in the future. Any failure by us to maintain or increase profitability in the future or achieve our profitability targets could adversely affect our business, financial condition, and results of operations.
We may not be able to sustain our revenue growth in the future.
Although our revenue has increased in recent periods, there can be no assurances that our revenue will continue to grow or do so at current rates, and you should not rely on the revenue of any prior quarterly or annual period as an indication of our future performance. Our revenue growth rate has declined in certain recent periods, and may continue to decline in future periods. In addition, as we continue to expand our platform and product offerings, or experience greater adoption of certain of our platform and product offerings, we have and may continue to experience variability in our revenue growth in certain markets or with certain customer segments relative to other markets or customer segments. Many factors may contribute to declines or variability in our revenue growth, including macroeconomic factors, increased competition, slowing demand for our platforms from existing and new customers, a failure by us to continue capitalizing on growth opportunities, terminations of existing contracts or failure to exercise existing options by our customers, and the maturation of our business, among others. If our revenue growth or revenue growth rate declines overall, or with respect to certain areas of our business, our business, financial condition, and results of operations could be adversely affected.
Our sales efforts involve considerable time and expense and our sales cycle is often long and unpredictable.
Our results of operations may fluctuate, in part, because of the intensive nature of our sales efforts and the length and unpredictability of our sales cycle. As part of our standard sales efforts, we invest considerable time and expense evaluating the specific organizational needs of our potential customers and educating these potential customers about the technical capabilities and value of our platforms and services. We often also provide our platforms to potential customers (including individual users at such customers) at no or low cost initially to them for evaluation purposes through short-term pilot deployments of our platforms, including at bootcamps, and there is no guarantee that we will be able to convert customers from these short-term pilot deployments to longer-term revenue-generating contracts. We may continue to modify and update our sales efforts to meet market demand and the organizational needs of our potential customers, including to implement new go-to-market mechanisms or self-service models, or to collaborate with third party service providers, and any of these changes may not be successful and could increase our operating expenses. In addition, we have grown and may continue to grow our direct sales force, and our sales efforts have historically depended on the significant involvement of our senior management team. The length of our sales cycle, from initial demonstration of our platforms to sale of our platforms and services, tends to be long and varies substantially from customer to customer. Our sales cycle often lasts six to nine months but can extend to a year or more for some customers. Because decisions to purchase our platforms involve significant financial commitments, potential customers generally evaluate our platforms at multiple levels within their organization, each of which often have specific requirements, and typically involve their senior management.
Our results of operations depend on sales to enterprise customers, which make product purchasing decisions based in part or entirely on factors, or perceived factors, not directly related to the features of the platforms, including, among others, that customer’s projections of business growth, uncertainty about macroeconomic conditions (including as a result of the ongoing Russia-Ukraine conflict and related economic sanctions, the ongoing conflict resulting from Hamas’ attack on Israel, heightened interest rates, monetary policy changes, or foreign currency fluctuations), capital budgets, anticipated cost savings from the implementation of our platforms, potential preference for such customer’s internally-developed software solutions, perceptions about our business and platforms, more favorable terms offered by potential competitors, and previous technology investments. In addition, certain decision makers and other stakeholders within our potential customers tend to have vested interests in the continued use of internally developed or existing software, which may make it more difficult for us to sell our platforms and services. As a result of these and other factors, our sales efforts typically require an extensive effort throughout a customer’s organization, a significant investment of human resources, expense and time, including by our senior management, and there can be no assurances that we will be successful in making a sale to a potential customer. If our sales efforts to a potential customer do not result in sufficient revenue to justify our investments, including in our growing direct sales force, our business, financial condition, and results of operations could be adversely affected.
Historically, existing customers have expanded their relationships with us, which has resulted in a limited number of customers accounting for a substantial portion of our revenue. If existing customers do not make subsequent purchases
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from us or renew their contracts with us, or if our relationships with our largest customers are impaired or terminated, our revenue could decline, and our results of operations would be adversely impacted.
We derive a significant portion of our revenue from existing customers that expand their relationships with us. Increasing the size and number of the deployments of our existing customers is a major part of our growth strategy. We may not be effective in executing this or any other aspect of our growth strategy.
Our top three customers together accounted for 18% and 17% of our revenue for the years ended December 31, 2023 and 2022, respectively, and 17% and 20% of our revenue for the three months ended March 31, 2024 and 2023, respectively. Our top three customers by revenue, for the three months ended March 31, 2024, have been with us for an average of eight years as of March 31, 2024. Certain of our customers, including customers that represent a significant portion of our business, have in the past reduced, and others may choose in the future to reduce, their spend with us or terminated their agreements with us, which has reduced our anticipated future payments or revenue from these customers, and which has required us to refund some previously paid amounts to these customers. It is not possible for us to predict the future level of demand from our larger customers for our platforms and applications.
While we generally offer contract terms of one to five years in length, our customers sometimes enter into shorter-term contracts which may not provide for automatic renewal and may require the customer to opt-in to extend the term. Our customers have no obligation to renew, upgrade, or expand their agreements with us after the terms of their existing agreements have expired. In addition, many of our customer contracts permit the customer to terminate their contracts with us with notice periods of varying lengths, generally three to six months. If one or more of our customers terminate their contracts with us, whether for convenience, for default in the event of a breach by us, or for other reasons specified