How PLTR (Palantir Technologies) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a software and data analytics leader like PLTR makes money is essential for investors and anyone interested in the business of enterprise AI and data platforms. In this post, we break down PLTR's quarterly income statement (Q2 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick PLTR Overview

PLTR operates as a leading provider of enterprise software platforms focused on big data analytics, artificial intelligence, and decision support for government and commercial clients. Revenue comes primarily from long-term software contracts, platform subscriptions, and professional services. The business is structured around two main segments: Government and Commercial, each contributing significantly to the top line.

Revenue Breakdown

• Total Revenue (Q2 2025): $1.00B (+48.0% YoY)
  • Government Revenue: $553.0M (55.1% of total)
  • Commercial Revenue: $450.7M (44.9% of total)
  • Growth is powered by rapid adoption of AI-driven solutions in both public sector and enterprise markets, with government contracts expanding and commercial uptake accelerating.

Gross Profit and Margins

• Gross Profit: $810.8M (80.8% gross margin)
  • Cost of Revenue: $192.9M (+50.1% YoY)
  • PLTR maintains robust margins due to its highly scalable software business model and efficient delivery of cloud-based analytics solutions.
• Most costs come from cloud infrastructure, customer support, and deployment services.

Operating Income and Expenses

• Operating Income: $269.3M (+155.7% YoY, 26.8% margin)
• Operating Expenses: $541.4M (+21.9% YoY)
  • R&D: $135.0M (+24.1% YoY, 13.5% of revenue) — Focused on advancing AI/ML capabilities, platform enhancements, and security features.
  • SG&A: $406.4M (+21.2% YoY, 40.5% of revenue) — Includes sales, marketing, and administrative costs to support global expansion and customer acquisition.
  • PLTR continues to prioritize innovation and invest in growth while maintaining efficiency in its operating structure.

Net Income

• Pre-Tax Income: $332.2M (+136.0% YoY, 33.1% margin)
• Income Tax: $3.60M (1.1% effective tax rate)
• Net Income: $326.7M (+143.6% YoY, 32.6% net margin)
• PLTR converts a significant portion of sales into profit due to its scalable software platform and disciplined cost management.

What Drives PLTR's Money Machine?

• Government Contracts: 55%+ of revenue, driven by multi-year deals with U.S. federal agencies and allied governments.
• Commercial Customer Growth: Commercial revenue up 46.6% YoY, reflecting strong demand from Fortune 500 and global enterprises.
• AI & R&D Investment: $135M invested in Q2 2025 to maintain leadership in AI, machine learning, and data integration.
• Emerging Markets: Expansion into healthcare, energy, and manufacturing verticals, though these segments are not yet major profit contributors.

Visualizing PLTR's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant investments in R&D and sales, 32.6% of revenue drops to the bottom line.

Key Takeaways

• PLTR's money comes overwhelmingly from government and commercial software contracts.
• High gross and net margins illustrate the power of PLTR's scalable, high-value software business model.
• Heavy investment in AI and R&D, balanced by efficiency in operating costs.
• Ongoing growth is driven by expanding government deals and accelerating commercial adoption of enterprise AI.

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FAQ About PLTR's Income Statement

1. What is the main source of PLTR's revenue in 2025?

PLTR generates over 55% of its revenue from government contracts, with the remainder coming from commercial clients in sectors like finance, healthcare, and manufacturing.

2. How profitable is PLTR in Q2 2025?

PLTR reported net income of $326.7M in Q2 2025, with a net margin of approximately 32.6%, reflecting strong profitability driven by high-margin software sales and disciplined expense management.

3. What are the largest expense categories for PLTR?

The biggest expenses on PLTR's income statement are operating expenses, particularly Research & Development (R&D) at $135.0M and Sales, General & Administrative (SG&A) at $406.4M in Q2 2025, as PLTR prioritizes innovation and global expansion.

4. Why does the Commercial segment operate at a loss?

The Commercial segment, despite generating $450.7M in revenue, posted an operating loss due to aggressive investment in customer acquisition, international expansion, and platform development, as PLTR believes these will drive long-term growth—even if the division is unprofitable today.

5. How does PLTR's effective tax rate compare to previous years?

PLTR's effective tax rate in Q2 2025 was 1.1%, consistent with previous years. This low rate is primarily due to tax benefits from share-based compensation and international structuring.