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Palantir is a software company that helps customers get the most out of their structured and unstructured data. Like many others, it pulls from years of AI/ML work to automate insight-gleaning. It utilizes complex neural networks to power anomaly detection, trend forecasting and natural language processing… all with the aim of making enterprises more successful in cultivating customer relationships, making informed decisions and driving financial success.  With Palantir, clients gain conjoined access to any data they need, and the tools to fully unleash that asset’s value. It gives customers a bird's-eye view of their operations, with detailed suggestions to help optimize products and uncover patterns. This all happens in a zero-risk environment via a process called ontology. Ontology enables clients to freely test massive digital twins to actually observe what works and what doesn’t. It’s like split-testing on steroids.

Revenue is neatly split into two buckets – “government” and “commercial.” Government clients predominantly use its Gotham product platform, while commercial clients mainly use its Foundry product platform. With Gotham, Palantir builds custom use cases for individual government clients. Foundry was built to be more malleable, with far more pre-built app integrations and developer kits available. That diminishes the need to conduct custom builds for every single enterprise. Still, it does materially more custom building than a typical B2B software firm will. It’s expensive, but also great for client stickiness and up-selling. It also seamlessly leverages the commercial platform to cater to industry-specific needs. By-industry models are intuitively named “micro-models.” These boast sector-specific use cases with granular, relevant regulatory compliance help. A financial services model from Palantir, for example, may specialize in assessing credit risk or fraud detection.

Palantir Apollo provides continuous integration and continuous delivery (CI/CD) to automate software package building and deployment. It’s a foundational piece of the firm’s ability to collect, utilize and drive value from broad data ingestion. This is a foundational piece of why Gotham and Apollo are so good at creating better outcomes.

AIP 101:

In the realm of GenAI and Agentic AI, Palantir is not playing the game of building the biggest model or buying the most GPUs to have the largest infrastructure footprint. It gives clients the ability to tap into whatever 3rd-party tools they want, while building granular use cases on top of them to finally extract ROI-fostering value from these assets. The app layer of AI is where this firm shines.

Its most exciting product is called Artificial Intelligence Platform (AIP) for highly automated app-building. The company compares AIP to what public cloud vendors did for compute and workload modernization. AWS, Azure, Google and Oracle provided the environment, tools, storage, security and maintenance needed to grow compute capacity without managing it yourself. This made migrations and adoption the rational decision. AIP attempts to do the same thing in terms of pushing enterprises to build and use GenAI applications. They fully manage all of the annoying and tricky pieces of embracing AI, allowing companies to more easily and confidently build (with Palantir’s help). AIP directly integrates with Foundry and Gotham, unlocking an ability to build powerful agents and apps with those products and an ability to extract more value from models. Considering the lack of finite and structured end products stemming from AIP, I think it helps to hear about some examples of what clients are doing with it:

AIP is where jumbled data, processes and ideas turn into the operationalized, actionable creation of GenAI products. Initial go-to-market for AIP has been its “bootcamps” where it hosts events to provide hands-on support and “get clients from 0 to use case in 5 days. It has more recently begun to build out an external sales team (slow ramp) to support this segment’s momentum. AIP progress is most noticeable in its impressive U.S. Commercial results.

“We are delivering the operating system for the modern enterprise in the era of AI.” – Co-Founder/CEO Alex Karp

More AIP Tools:

All of these products reduce friction associated with using AIP and Palantir’s software by adding support for 3rd-party services, expediting and managing product creation and offering a secure environment (with compelling automation) to do all of this work.

More Products to Know:

PLTR trades for 97x… yes 97x forward sales. It also trades for 280x forward EPS, as the sky-high sales multiples is a bit offset by sky-high margins. Those margins depend on differentiation-based pricing power that looks quite strong for Palantir right now. Estimates will sharply rise following this report, which will lower the forward multiple a bit too. It’ll still be extremely elevated, but worth noting. EPS is expected to grow by 58% this year and by 35% over 2026-2027 (pre-revisions).

“We are obviously not going to forecast for next year, but I if you're thinking about how this company is going to go, look at our ability to create value, revenue and unit economics. If you're a technical expert in how to evaluate businesses, evaluate those numbers against any other business you've ever seen and then make your decision. Yeah, I'm wildly enthusiastic. I think we're wildly enthusiastic.” – Co-Founder/CEO Alex Karp

Short call (44 minutes) as always.

Taking a Moment to Appreciate These Numbers:

These numbers are ridiculously good… again. $1M+ deals doubled Y/Y while $5M+ deals 5Xed. Total Contract Value (TCV) bookings rose by 151% to $2.8B, eclipsing last quarter’s record by a full 18%. U.S. Commercial TCV bookings rose 342% Y/Y, crushing previous quarterly records. Revenue from its top 20 customers rose 38% Y/Y to $83M, while overall customer growth modestly surpassed expectations once more. Remaining Deal Value (RDV) rose by 91% Y/Y (U.S. commercial +199% Y/Y), pointing to demand remaining overwhelmingly strong for this company going forward. And while net dollar retention continues ramping to a now elite 134%, they think that’s going higher. Any metric we look at here will make your jaw drop like it has for the last year. This is the company monetizing the app layer of the AI opportunity better than anyone else on the planet. And it is not particularly close, either. To do all of this while also delivering 10+ points of Y/Y operating leverage is truly bonkers.

U.S. Commercial & AIP:

U.S. Commercial is leading the way as enterprise flocks to Palantir as their AI app innovation partner. AIP is dominating for the same reason it has dominated since inception. It’s created unmatched, proven value. Leadership is confident that their recipe of AI FDEs, ontology and Foundry is best-in-class. And they think the ability to use their software to actually extract useful applications from LLMs is unmatched. It’s very hard to disagree when looking at results. More customer case studies help provide a lot more evidence too:

It’s quite simple. Palantir is delivering better outcomes than its competition at the moment. It’s packing all needed AI services into a highly compelling and well-crafted bundle and giving these customers everything they need to solve their most pressing problems. Thanks to fully leveraging a customer’s own data paired with PLTR’s cutting-edge tools, the solutions to these problems are better. As Karp puts it, they’re making their customers a ton of incremental money, and taking a small piece of that. No customer will ever have an issue with you spiking their profits more than anyone else can and taking a small cut. AIP is thriving because AIP is a better product. That’s how this product continues to accelerate despite very tough comps.

They’re also doing it while the sales team shrank Y/Y. How? The autonomous AI FDE army within AIP is rapidly getting customers to operational solutions in a far more autonomously managed manner. Less heavy customer lifting for better end-products and more support is a mix that sells itself. Generally speaking, Palantir slowly built a platform based on fixing very tough problems for a diverse set of industry leaders across different parts of the economy. That has made the platform so impactful and malleable, as they can easily learn from previous work and seamlessly tweak it to fit the mold of other needs.

“Headcount is one manifestation of our disciplined approach. The casual expansion of our ranks would have diminished the need to lean even more heavily on the strength of our software and the ontology and to ensure their continued maturation.” – Co-Founder/CEO Alex Karp

More AIP Applications:

AI HiveMind, is Palantir’s new agent organization product. This can group, guardrail and surgically unleash a “swarm” of agents to conduct complex workflows. The swarm is large, yet orderly in this case. HiveMind directly plugs into a company’s data and ontology engine so that these workflows can be further localized for specific requirements. This was first used for government agencies, but is showing real promise for commercial customers too. As leadership puts it, HiveMind “uncovers hidden opportunities” while Palantir’s platform actionably frees customers to turn those insights into implementations.

Next, it introduced Edge Ontology. This is a slimmed-down version that enables running Palantir’s software and building with its platform on a mobile device.

Finally, Palantir announced the Multimodal Data Plane. This provides data storage with a high degree of data modality flexibility and full storage location control. It lets companies use whatever structured query language (SQL) they’d like and essentially any model as well. Model choice now includes Nvidia’s, which were recently made available on AIP through a new partnership. PLTR helps integrate these models with its own base of specialized AI models (k-LLMs).

Operation Warp Speed:

Warp Speed is enjoying broadening adoption. While initial users were “new defense entrants to meet production goals,” now “traditional defense companies” are joining the party. They’re pleased with this project, and even if it doesn’t directly deliver a ton of revenue, it’s worth it. They’re creating companies that are more capable of using Palantir products in useful ways. These companies are getting more educated about all of this potential gain. It should be a core business accelerant, while also helping the United States regain its manufacturing mojo. And along the lines of upskilling America, its 90-day training program (American Tech Fellowship) is attracting customer attention. They’re asking Palantir to create new programs for their workforces.

Government Business:

The U.S. Army sent a memo for all Army orgs to “consolidate and centralize on Vantage, which is its AIP and Foundry-based platform purpose built for the Army. This will accelerate the replacement of old systems and will unlock more budget for PLTR products. Across the pond, International government growth was again powered by the UK.

Another incredible quarter. This company boasting a 2025 Rule of 40 score over 100 is remarkable. Every number we look at is unfathomably good just like it has been for over a year. There is nothing to do but sit and admire what this company is currently doing. It is a great American growth story.

With that said, I will never pay anywhere close to 100x for any stock. This company somehow makes Cloudflare and CrowdStrike look dirt cheap. Very hard to do. The forward growth multiple is at 8.0x and still probably well over 5.0x after accounting for probable estimate revisions and future outperformance vs. estimates. If you’re wondering how a quarter this elite was shrugged off by Mr. Market, that is how. Their insane valuation means the entire world was expecting insane numbers. They delivered, but it wasn’t a shock. Why? Because they have trained us to expect masterful performance. That makes positive surprise and multiple expansion (especially from this starting point) harder to deliver. I don’t think there’s a company on the planet I’d rather buy at 20x forward earnings right now. There’s just no way I’m going to pay a price tag 14x higher than that or anything close to it. They deserve this premium more than anyone else. But nobody deserves this premium.

Hims sells men’s and women’s health products with a direct-to-consumer business model. It allows users to more comfortably access sensitive prescriptions within areas like erectile dysfunction or hair loss, without going to an office or a pharmacy. Products are mailed right to a consumer’s door.

It offers standard and personalized medicine and subscriptions. Personalization is enabled & amplified by its electronic medical record (EMR) system. From its early days, Hims built this EMR foundation to enable scalable data ingestion, automate tedious provider work and foster rapid product expansion. That remains absolutely vital in the firm’s future. It paved the way for MedMatch, which is the company’s tool that uses all customer interactions and data to uncover valuable consumer insight and nudge best provider practices. It also enabled Clever Routing, which contextualizes individual user needs to prioritize and match demand with proper levels of care.

The company beat revenue estimates by 3.3% & beat guidance by 3.3%. It also missed subscriber estimates by 4.7%. As a reminder, it’s shifting its sexual health subscriber base to daily solutions for a “wider spectrum of needs.” This is leading to some disruption and churn, but will help this segment’s durable growth over the coming years. Excluding this headwind, subscribers would have grown by 40% Y/Y. They view this growth drag diminishing during the second half of 2026, which is when they expect HIMS growth to accelerate.

The weak gross margin came from a mix shift away from personalized semaglutide sales, following the end of offering that GLP-1. Investments in new specialties also weighed on quarterly results. All of the Y/Y operating leverage came from marketing. They’re finding it easier to efficiently sell their brand, as they can now market nationally to both men and women in the same slot (scaled Hers business) and can connect that marketing to more products for customers. Investments in new specialties, data analytics and hiring a lot of new tech talent all led to G&A and R&D both rising 2 points as a percent of revenue.

Q4 guidance includes about $22.5M in revenue headwinds from a reduction in GLP-1 shipping cadence (meaning lower volume and revenue per shipment). This is a byproduct of removing commercial semaglutide and resulting changes in fulfillment format, following its removal from the shortage list. The headwind is expected to continue for another few quarters and normalize during the second half of next year. Furthermore, guidance continues to bake in a headwind from the sexual health business transition to daily solutions, which is also expected to go away during the second half of next year. It also maintained $50M in annual Zava (European online prescription company they bought) revenue. 

Finally, aggressive investments discussed in the margin section could lead to 2026 margin expansion pausing, per the team.

“The opportunities to accelerate our trajectory are materializing quicker than anticipated, and we are leaning in.” – CEO Andrew Dudum

HIMS trades for 38x forward EPS. Estimates should be pretty flat. EPS is expected to grow by 12% this year and then at a 27% compounded annual clip over the following two years.

Vertical Integration Through More 503A Capacity:

Hims remains determined to aggressively build out its manufacturing infrastructure and drive vertical integration. This added control from production through distribution should lead to better consistency vs. relying on a web of 3rd-party vendors. This will also give Hims a lot more flexibility to personalize treatments in more ways, such as new microdosing options for GLP-1 compounds. Similarly, this enhances its optionality to use capacity (now its own) and expand into new verticals. And furthermore, this also means they’re no longer paying those aforementioned 3rd-parties any fees. While this has been a material cash flow drag, it gives HIMS a vertically integrated cost structure that is more defensible than its previous business model. Is this a moat? I don’t really think so… but it does make them less fragile and captures more margin; it’s an investment worth making.

They’re on schedule to open a new facility in Ohio to eclipse 1 million square feet of overall space this year. They see this as a way to “establish a gold standard for compounding infrastructure” and “position themselves for accelerating growth with expanding margins.” By the end of 2026, they expect to have 50%+ of GLP-1 ordered self-fulfilled, unlocking more profit dollars or the ability to pass more savings onto customers. This is how they just cut GLP-1 prices by “as much as” 20%. The new space will unlock new gummy form factors for certain medications, for example.

Lab Testing, Preventative Care & Longevity:

Hims is excited to introduce full-body at-home lab testing by the end of this year. They think this testing and diagnostics offering expands their addressable market from solely fixing health issues with prescriptions to also preventing new issues from occuring. They want to make that preventative care access the “standard” not a "privilege." That should expand top of funnel, as customers will be able to benefit from a Hims offering even if they’re suffering from some ailment. It will also unlock new category expansion, like its recent testosterone offering and upcoming peptide treatments. Whether it’s blood tests to uncover deficiencies, hormone imbalances, and genetic risk markers that impact disease probabilities, this will open up a lot more use cases. Generally speaking, lab testing and diagnostics push HIMS into the field of proactive longevity (2026 launch). This category not only is quickly growing (especially areas like peptides), but helps them gain more holistic, end-to-end, long-term customer relationships. Separately, this should also help with engagement, frequency and retention, considering many of the planned longevity offerings will be daily prescriptions, supplements or vitamins.

More on Data & Personalization

HIMS talks about it every quarter… they view their access to and EMR-based usage of data as enabling superior product personalization. This personalization creates unique value and improves every HIMS key performance indicator. It granularly meets a wider set of needs and preferences, diminishes side effects, boosts adherence, enhances customer lifetime value and makes Hims a better company. And the shift keeps going well.  Personal subscriptions rose 50% Y/Y and powered all of the company growth. Non-personalized subscriptions fell Y/Y as that’s just not their focus anymore. A great way to accelerate data collection, insight gleaning and more experience personalization is with higher engagement. And a great way to accomplish that is via multiple condition treatment plans. Those rose 80% Y/Y to 20% of total subscribers.

“We believe our platform is uniquely positioned. We have the lab testing capabilities to offer deeper health insights. We have the provider network and compounding infrastructure in place to help take action against those insights. And we have a strengthening data feedback loop that can help measure, adapt, and refine care at scale.” – Founder/CEO Andrew Dudum

New Product Categories:

Lab testing and added capacity are paving the way for its testosterone entry. And while it has only been a few weeks, they like what they’re seeing. 60% of customers are existing HIMS members, and they’ll look to build more momentum through oral options (via Marius Pharmaceuticals partnership) next year.

It’s also adding menopause products this quarter, marking entry into another hormone treatment area. This impacts 1.3M American women per year, yet just 30% of OB/GYN residency programs train their new doctors, per the shareholder letter. They think they can help “close the availability gap” a lot and can use this to drive the Hers brand towards $1B in 2026 revenue. As leadership was quick to point out, both of these launches entail “deeply personal conditions” and they view their vertically integrated production chain as a key enabler of the recipe that most can’t match.

“These launches expand our reach across life stages and conditions, and more importantly, they lay the groundwork for the next era where Hims & Hers can change the status quo for millions of customers: proactive health and diagnostics.” – Founder/CEO Andrew Dudum

International Expansion:

Early integration work as part of their Zava purchase has given them a “strong foundation” in the UK, Germany and France. They’re deepening the UK offering based on encouraging trends and just launched in Spain to add 39M more adults to their addressable market. They’re also nearing a Canadian launch, where they’ll actually have access to generic doses of semaglutide (a popular GLP-1 compound). If Canada is anything like the USA (and it is), that should help with adoption. Looking ahead, they’re eyeing Brazil, Southeast Asia and Australia as more markets and generally view their business model as relevant across the entire developed world.

GLP-1:

They’re in “active discussions” with Novo Nordisk to add Wegovy and Oral Wegovy (post approval) to the platform through a referral arrangement. This will mean more Hims revenue and a wider product portfolio, but will limit the firm’s ability to offer discounts or collect a lofty margin. HIMS wants to maximize customer choice and this is a needed step in doing so.

They continue to see their more holistic treatment plans, personalization (fewer side effects and better dosing) and education as boosting their member adherence rates for these prescriptions vs. the field.

Partnerships:

“As we continue building a platform that unlocks broader access to care that's personal, proactive, and connected, we expect that broader collaboration will become key. Whether that's through partnerships, investments, or joint innovation, we see enormous potential to work alongside others across the healthcare ecosystem to make this future a reality.” – Founder/CEO Andrew Dudum

Somewhat underwhelming quarter, but better than feared. Expectations were falling as credit card and download data throughout the quarter pointed to weakness. These results weren’t as awful as they could have been and probably have some bulls exhaling. My views of the company haven’t changed. I think they’ve executed extremely well since going public and leadership deserves a lot of credit. But…  I also just don’t like the model. The regulatory risk here puts this in my “too hard” pile. The flexibility to personalize remains highly confusing and I think that will remain an overhang for the company too. That may keep creating headline risk, while Amazon’s entrance into the space will too. AMZN can be the predatory pricing entity in this space and make money on other segments whenever they feel like making that decision. And if history is any indication, that decision is probably coming as soon as Hims demonstrates enough revenue for Amazon to chase. Hims can still grow with that threat, but a rapid pace with margin expansion will become much tougher to deliver. 

With all of that said, I’ve been a skeptic for a couple years now and the stock has done quite well. Their team has outperformed my expectations for them on a consistent basis, and that could always continue. Maybe the sexual health subscriber headwind dissipates (very likely) and they expand into more categories successfully. It’s possible, but there’s a long list of companies with perceived risk/reward that I prefer.