European headwinds temper Palantir's impressive Q1

Palantir has made an impressive start to 2025, with Q1 revenue growing by 39% year-on-year. Based on strong momentum in the US commercial sector, the company has also raised its financial guidance for the full year; however, it continues to struggle against headwinds outside of the US. 

Revenue for the three months ended 31 March 2025 was up 39% year-on-year to $884m (Q1 2024: $634m), representing a 7% improvement quarter-on-quarter. Gross profit was up 37% to $711m (Q1 2024: $518m) and income from operations was $176m (Q1 2024: $81m). Adjusted income from operations, which excludes stock-based compensation expense and related employer payroll taxes, was $391m (Q1 2024: $226m) and adjusted EBITDA was $397m (Q1 2024: $235m).

Palantir’s US commercial business remains the key growth driver, with revenue improving 71% year-on-year to $255m (Q1 2024: $150m). US government revenue grew 45% year-on-year to $373m (Q1 2024: $257m), helping to boost overall US revenue to $628m (Q1 2024: $408m), year-on-year growth of 55% and quarter-on-quarter growth of 13%. Largely due to ongoing challenges in Europe, Palantir’s US business represented 71% of total revenue during the period, compared to 64% at the same point last year. 

International revenue was up 12% year-on-year to $255m (Q1 2024: $228m), with 45% growth in its international government business (taking revenue to $114m) being offset by a 5% decline in its international commercial business (resulting in revenue dropping to $141m). This represented the first year-on-year decline in international commercial revenue and is likely to have contributed to the subdued response to its results by investors. 

International government revenue growth was attributed to the UK, through its ongoing work with the NHS (the NHS Federated Data Platform) and Ministry of Defence, as well as its new partnership with NATO (see NATO's tech acquisition: Palantir advances military AI involvement). 

Speaking about Palantir’s international performance, CEO Alex Karp said, “Europe doesn’t get AI yet. At some point in the future, it will” but he warned “It could take a couple years for Europe to understand that you just can’t spend money, you’re gonna have to spend it on things that actually work”. 

Although increased defence spending in Europe is likely to benefit Palantir, its business in the region will be impacted by ongoing concerns about EU-US trading arrangements, whether the US remains a reliable partner, and the associated prioritisation of investment in data sovereignty.

For the full year, driven by US commercial growth (which is expected to grow by at least 68% year-on-year), Palantir has raised its revenue guidance to between $3.890bn and $3.902bn. 

Posted by: Dale Peters at 09:58

Tags: results   software   AI   data