On May 4, 2026, Palantir reported first-quarter revenue of $1.633 billion, up 85% year-over-year — its fastest growth rate ever, at a scale where growth is supposed to slow — and net income of $876 million, a 53.7% net margin. That net margin is higher than its 46.2% operating margin, which is not how income statements usually work. And underneath both figures, the balance sheet carries an accumulated deficit of $2.69 billion: added up across its entire life, Palantir has still lost more money than it has made. All three of those statements are true at once, and a double-entry ledger is where they have to be reconciled.
The Headline Numbers
Palantir's fiscal year is the calendar year; Q1 2026 ended March 31, 2026. Every figure below is GAAP, from the 10-Q.
| Metric | Q1 2026 | Q1 2025 | YoY Change |
|---|---|---|---|
| Revenue | $1,632.6M | $883.9M | +84.7% |
| Cost of revenue | $215.8M | $173.0M | +24.8% |
| Gross profit | $1,416.8M | $710.9M | +99.3% |
| Gross margin | 86.8% | 80.4% | +6.4 pts |
| Sales and marketing | $319.2M | $236.3M | +35.1% |
| Research and development | $161.0M | $134.9M | +19.3% |
| General and administrative | $182.6M | $163.6M | +11.6% |
| Total operating expenses | $662.8M | $534.8M | +23.9% |
| Income from operations | $754.0M | $176.0M | +328.3% |
| Operating margin | 46.2% | 19.9% | +26.3 pts |
| Interest and other income | $134.6M | $47.3M | +184.8% |
| Provision for income taxes | $12.2M | $5.6M | +117.9% |
| Net income | $876.4M | $217.7M | +302.5% |
| Net margin | 53.7% | 24.6% | +29.1 pts |
| Diluted EPS | $0.34 | $0.08 | +325% |
The whole quarter is in two rows. Revenue grew 85%. Total operating expenses grew 24%, and cost of revenue grew 25%. When your revenue nearly doubles and your cost base grows by a quarter, operating margin does what it did here: it more than doubled, from 19.9% to 46.2%. Operating expenses consumed 60.5% of revenue a year ago; this quarter they consumed 40.6%.
This is what genuine operating leverage looks like in a software business, and it is worth being precise about why it is credible: Palantir did not cut anything. Sales and marketing spending rose 35%, R&D rose 19%, G&A rose 12%. Every cost line grew. Revenue simply grew far faster. The company is not harvesting margin from austerity; it is out-running its own cost base.
Then there is the line that does not fit the pattern. Palantir earned $888.6 million before tax and paid $12.2 million of it — an effective tax rate of 1.4%. That single line is why net income ($876.4M) exceeds operating income ($754.0M), and it is the most important number in this report. More on it below.
Revenue Deep Dive: One Country, Two Segments
Palantir reports two segments. Both roughly doubled, and both saw contribution margins jump about 12 points.
| Segment | Q1 2026 Revenue | Q1 2025 Revenue | YoY | Q1 2026 Contribution | Contribution Margin (vs prior) |
|---|---|---|---|---|---|
| Government | $858.4M | $487.0M | +76.3% | $629.4M | 73% (from 62%) |
| Commercial | $774.2M | $396.9M | +95.1% | $563.0M | 73% (from 61%) |
| Total | $1,632.6M | $883.9M | +84.7% | $1,192.4M | — |
Commercial is growing faster than Government (95% vs 76%), which matters because the long-standing bear case on Palantir was that it is a government contractor wearing a software company's valuation. That case is getting harder to make: Commercial is now 47% of revenue and closing the gap.
But the geography table is the one that tells you what actually happened this quarter.
| Region | Q1 2026 | Q1 2025 | YoY | % of Revenue |
|---|---|---|---|---|
| United States | $1,282.1M | $628.5M | +104.0% | 79% |
| United Kingdom | $130.1M | $89.7M | +45.1% | 8% |
| Rest of world | $220.4M | $165.7M | +33.0% | 13% |
US revenue more than doubled. Everything outside the US grew about 37% in aggregate — respectable, and utterly unlike the US line. Within the US, commercial revenue reached $595 million (+133% year-over-year) and government revenue $687 million (+84%).
So the correct one-sentence description of this quarter is not "Palantir grew 85%." It is: the American AI-adoption story is carrying the entire company, and US commercial is its sharpest edge. That is a genuine strength and a genuine concentration risk, and the ledger will not let you record it as anything else.
The Margin Story
Six periods, straight from the ledger:
| Period | Revenue | Gross Margin | Operating Margin | Net Margin | Net Income |
|---|---|---|---|---|---|
| FY2021 | $1,541.9M | 78.0% | −26.7% | −33.7% | −$520.4M |
| FY2022 | $1,905.9M | 78.6% | −8.5% | −19.5% | −$371.1M |
| FY2023 | $2,225.0M | 80.6% | 5.4% | 9.8% | $217.4M |
| FY2024 | $2,865.5M | 80.2% | 10.8% | 16.3% | $467.9M |
| FY2025 | $4,475.4M | 82.4% | 31.6% | 36.5% | $1,634.6M |
| Q1 FY2026 | $1,632.6M | 86.8% | 46.2% | 53.7% | $876.4M |
Look down the last two columns. In every single profitable period, Palantir's net margin exceeds its operating margin. That is unusual — for most companies, interest expense and taxes carve the net margin below the operating margin. Palantir has the opposite structure, for two reasons that show up as exactly two lines in the ledger:
- It has no debt and a large cash pile. $8.0 billion in cash, equivalents, and short-term Treasuries generates interest income ($66.4M this quarter) instead of interest expense. The balance sheet is a profit center, not a cost.
- It barely pays tax. $12.2 million on $888.6 million of pre-tax income.
In FY2023 this effect was so pronounced that interest income alone ($132.6M) exceeded income from operations ($120.0M) — Palantir's cash was more profitable than Palantir's business. That is emphatically no longer true: operating income is now 11× interest income, which is itself the clearest sign of how much the underlying business has changed.
The One Big Question: What Happens When Palantir Starts Paying Taxes?
Here is the tax line across four years, next to the pre-tax income it was assessed on:
| Period | Pre-tax Income | Provision for Income Taxes | Effective Rate |
|---|---|---|---|
| FY2023 | $237.1M | $19.7M | 8.3% |
| FY2024 | $489.2M | $21.3M | 4.3% |
| FY2025 | $1,657.4M | $22.7M | 1.4% |
| Q1 FY2026 | $888.6M | $12.2M | 1.4% |
Pre-tax income grew roughly 7× from FY2023 to FY2025. The tax bill grew from $19.7 million to $22.7 million. In absolute dollars, Palantir's tax expense has been approximately flat while its profits exploded.
Palantir's 10-Q explains why: its effective rate differs from the US 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." In plain terms — Palantir spent years losing money, which generated deferred tax assets it did not believe it would ever use, so it wrote them down with a valuation allowance. Now that it is profitable, those historical losses are absorbing income that would otherwise be taxed.
That creates a specific, dateable, two-step future:
- A one-time gain. When a company becomes durably profitable, it releases the valuation allowance and books the recovered deferred tax assets — a large, non-cash, one-off benefit to net income. If Palantir does this, expect a quarter with a spectacular and completely meaningless EPS number.
- A permanent step-up in the tax rate afterward. Once the shield is consumed, the effective rate climbs toward statutory. At a 21% federal rate, this quarter's $888.6 million of pre-tax income would have carried roughly $187 million of tax rather than $12 million — cutting net income by about 20%.
Note the distinction the ledger forces you to keep straight: the $2.69 billion accumulated deficit on the balance sheet is a book figure, and the tax shield comes from tax-basis loss carryforwards and the valuation allowance against them. They are related — both are consequences of the same lost decade — but they are not the same number and they will not expire on the same day. What is certain is that the direction of travel for Palantir's tax rate is up, and none of the current net-margin figures survive that transition unchanged.
Tracking a $10 Billion Company in Plain Text
Double-entry bookkeeping has an unglamorous virtue: nothing can be quietly left out, because the books do not balance until every dollar is placed. Modeling Palantir in Beancount makes the tax anomaly impossible to skim past, because the tax line sits in the same transaction as the revenue.
In Beancount, income is a negative (credit) amount and expenses are positive (debit) amounts; net income is the balancing figure. Palantir reports in thousands, so this ledger uses three decimal places — every number below is exact to the filed dollar-thousand.
; FY2026 Q1 Income Statement — three months ended March 31, 2026
; Revenue: 1,632,583 | CoR: 215,798 | R&D: 160,981 | SG&A: 501,806
; OtherNet: 134,603 (net other INCOME) | Tax: 12,199 | Net Income: 876,402 ($ thousands)
; Check: -1632.583 + 215.798 + 160.981 + 501.806 - 134.603 + 12.199 + 876.402 = 0 ✓
2026-03-31 * "Palantir Technologies Inc." "FY2026 Q1 Income Statement"
Income:Revenue -1632.583 MUSD ; revenue earned (credit)
Expenses:CostOfRevenue 215.798 MUSD ; gross margin 86.8%
Expenses:ResearchAndDevelopment 160.981 MUSD
Expenses:SellingGeneralAdministrative 501.806 MUSD ; S&M 319,220 + G&A 182,586
Income:OtherNet -134.603 MUSD ; interest income 66,394 + other income 68,209
Expenses:IncomeTax 12.199 MUSD ; 1.4% effective rate on 888,601 pre-tax
Equity:Adjustments 876.402 MUSD ; net income offsetNotice what the sign convention exposes. Income:OtherNet is negative — it is income, not expense. It sits in the income statement contributing $134.6 million of profit that the operating business did not produce. And Expenses:IncomeTax, at 12.199, is smaller than the R&D line, smaller than the cost of revenue, smaller than every other expense in the transaction. A tax bill that is the smallest number in the income statement of a 53%-net-margin company is an anomaly you have to work to notice in a press release. In a ledger it is simply sitting there, in line order.
The balance-sheet line that carries the story is retained earnings:
2026-03-30 pad Equity:RetainedEarnings Equity:Adjustments
2026-03-31 balance Equity:RetainedEarnings 2691.863 MUSD ; ACCUMULATED DEFICIT (debit balance)That balance is positive, and in Beancount's sign convention a positive equity balance is a debit — which is to say, a hole. Every other company in the Open Ledger carries retained earnings as a credit. Palantir carries a $2.69 billion accumulated deficit: after twenty-plus years, its lifetime losses still exceed its lifetime profits. The deficit peaked at $5.86 billion at the end of FY2022 and has fallen every period since. At the current rate of roughly $876 million a quarter, it crosses zero in about three quarters — some time in late 2026, Palantir will finally, cumulatively, have made money.
The Multi-Year Arc
| Fiscal Period | Revenue | YoY Growth | Operating Margin | Net Income | Diluted EPS | Accumulated Deficit |
|---|---|---|---|---|---|---|
| FY2021 | $1,541.9M | +41% | −26.7% | −$520.4M | −$0.27 | $5,485.7M |
| FY2022 | $1,905.9M | +23.6% | −8.5% | −$371.1M | −$0.18 | $5,859.4M |
| FY2023 | $2,225.0M | +16.7% | 5.4% | $217.4M | $0.09 | $5,649.6M |
| FY2024 | $2,865.5M | +28.8% | 10.8% | $467.9M | $0.19 | $5,187.4M |
| FY2025 | $4,475.4M | +56.2% | 31.6% | $1,634.6M | $0.63 | $3,562.4M |
| Q1 FY2026 | $1,632.6M | +84.7% | 46.2% | $876.4M | $0.34 | $2,691.9M |
The growth column is the remarkable one, and it is remarkable in a way that is easy to miss. Read it downward: +23.6%, +16.7%, +28.8%, +56.2%, +84.7%. Palantir decelerated to 17% in FY2023 and has accelerated every year since, at ever-larger revenue. Companies that big do not normally re-accelerate; they grind downward as the law of large numbers catches them. Whatever one thinks of the valuation, that curve is not a normal software curve, and the FY2023 trough is the proof that the recent numbers are not just a long-running trend line.
The deficit column is the counterweight. It ran up through FY2022 and has been falling since — the ledger's memory of a decade in which this company burned cash on a scale that it is only now, in 2026, finishing repaying.
The Verdict: Bull vs. Bear
Bull Case
- Growth is accelerating at scale: 16.7% → 28.8% → 56.2% → 84.7%. Re-acceleration at $4B+ of revenue is rare and cannot be explained by an easy comparison base.
- Real operating leverage, not cost-cutting: revenue +85% while every expense line still grew (S&M +35%, R&D +19%, G&A +12%); total costs rose only ~24%.
- Gross margin expanded to 86.8% (+6.4 points), and both segments' contribution margins jumped ~12 points to 73%.
- A Rule of 40 score of 145% (85% growth + 60% adjusted operating margin) — the metric was designed to be hard to hit at 40.
- Fortress balance sheet: zero debt, $8.0 billion in cash and Treasuries, $924.6 million of adjusted free cash flow in the quarter (57% margin). It funds itself.
- Stock-based compensation is falling as a share of revenue (12.3%, down from 17.6%), and diluted share count grew only 0.7% year-over-year — the dilution objection is weakening.
- Management raised full-year 2026 revenue guidance to $7.650–7.662 billion (+71%), a 10-point raise over the prior guide.
Bear Case
- The 1.4% effective tax rate is temporary by construction. Normalizing toward 21% would have cost roughly $187M this quarter instead of $12M — about 20% of net income.
- The net margin is flattered by the balance sheet: $134.6M of interest and other income is 15% of pre-tax income and has nothing to do with selling software.
- GAAP operating margin is 46%, not the headline 60% — the $201.6M gap is mostly stock-based compensation, a real cost that "adjusted" figures exclude.
- Extreme geographic concentration: the US grew 104% while everything else grew ~37%. This is a bet on one country's AI adoption cycle.
- Government is still 53% of revenue, and $687M of it is US government — exposed to appropriations, procurement cycles, and political weather.
- The company has never, cumulatively, earned a dollar: a $2.69B accumulated deficit is the arithmetic record of how expensive it was to get here.
Our Take
The operating story here is real and is being under-described by the bears: a company at this revenue base does not re-accelerate from 17% to 85% growth by accident, and it did it while letting every cost line grow, which is the hard way and the durable way. The Rule of 40 score of 145% is not a fluke of one metric — it is what a genuinely high-gross-margin business looks like when demand arrives faster than its cost base.
But investors reading a 53% net margin should understand they are reading three things stacked on top of each other: a 46% operating margin, a balance sheet that pays them $135 million a quarter, and a tax rate that is 1.4% for reasons that expire. Strip the last two back to normal — a statutory tax rate and no interest windfall — and Palantir is a ~46%-operating-margin software company growing 85%. That is still an outstanding business, and it is a materially different one from the 53%-net-margin machine the headline implies. The ledger's job is to make sure you never confuse the two, and the accumulated deficit sitting on the balance sheet as a debit is there to remind you which one arrived first.