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

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Understanding how a data analytics and AI software provider like PLTR (Palantir Technologies) makes money is essential for investors and anyone interested in the business of enterprise software and government technology. In this post, we break down PLTR's quarterly income statement (Q3 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

Palantir Technologies operates a SaaS-based business model, delivering advanced data analytics, artificial intelligence, and decision-making platforms to government agencies and commercial enterprises. Revenue comes primarily from long-term software contracts, platform subscriptions, and professional services. The business is split into two main segments: Government and Commercial, each contributing significantly to overall growth.

Revenue Breakdown

• Total Revenue (Q3 2025): $1.18B (+62.8% YoY)
  • Government Revenue: $632.7M (53.6% of total, +54.9% YoY)
  • Commercial Revenue: $548.4M (46.4% of total, +72.9% YoY)
  • Growth is powered by rapid adoption of AI-driven platforms in both government and private sectors, with commercial expansion outpacing government growth.

Gross Profit and Margins

• Gross Profit: $973.8M (82.4% gross margin)
  • Cost of Revenue: $207.3M (+41.4% YoY)
  • PLTR maintains robust margins due to its scalable digital business model and high-value software offerings.
• Most costs come from cloud infrastructure, personnel for deployment and support, and ongoing platform maintenance.

Operating Income and Expenses

• Operating Income: $393.3M (+247.6% YoY, 33.3% margin)
• Operating Expenses: $580.5M (+24.6% YoY)
  • R&D: $144.2M (+22.7% YoY, 12.2% of revenue) — Focused on AI model development, platform enhancements, and security features.
  • SG&A: $436.3M (+25.3% YoY, 36.9% of revenue) — Includes sales teams, marketing, administrative costs, and customer success.
  • PLTR continues to prioritize innovation and invest in growth while maintaining operational efficiency.

Net Income

• Pre-Tax Income: $480.5M (+205.8% YoY, 40.7% margin)
• Income Tax: $4.9M (1.0% effective tax rate)
• Net Income: $475.6M (+231.4% YoY, 40.3% net margin)
• PLTR converts a significant portion of sales into profit due to its scalable software model and strong pricing power.

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What Drives PLTR's Money Machine?

• Government contracts: 53.6% of revenue, driven by long-term, high-value deals with defense and intelligence agencies.
• Commercial platform adoption: Commercial revenue grew 72.9% YoY, reflecting strong demand for AI and analytics in private industry.
• R&D investment: $144.2M in Q3 2025, fueling next-gen AI and data platforms.
• Future growth areas: Healthcare analytics, energy sector solutions, and international expansion, though not yet profitable.

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 heavy investments in R&D and SG&A, 40.3% 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 SaaS business model
• Heavy investment in AI and platform development, balanced by efficiency in operating costs
• Ongoing growth is driven by expanding commercial adoption and deepening government relationships

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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 53.6% of its revenue from government contracts, with the remainder from commercial clients. Both segments are growing rapidly, especially commercial.

2. How profitable is PLTR in Q3 2025?

PLTR reported net income of $475.6M in Q3 2025, with a net margin of approximately 40.3%, reflecting strong profitability driven by high-margin software sales and operational efficiency.

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 $144.2M and Sales, General & Administrative (SG&A) at $436.3M in Q3 2025, as PLTR prioritizes platform innovation and sales expansion.

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

The commercial segment, despite generating $548.4M in revenue, posted an operating loss due to aggressive investments in sales, marketing, and product development, as PLTR aims to capture long-term market share—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 Q3 2025 was 1.0%, significantly lower than prior years. This low rate is primarily due to tax benefits from share-based compensation and international structuring.