What Can We Learn About Growth, Churn And Retention From Palantir's Latest Earnings Report
Palantir had a great quarter but we wanted to look at their growth, retention and churn metrics and found some interesting information.
Palantir has the highest market cap of any publicly traded software company. It has also recently joined the S&P 500, and also employs the most amount of forward deployed engineers (a term I only recently heard about).
So of course, the only natural course of action for me, was to understand what their customer growth, retention and churn metrics look like in the most recent Q2 earnings report.
Why? Because that’s what we do at ChurnDog!
First the headline: Palantir Technologies saw a 43% year-over-year increase in total customer count.
But here's some interesting nuggets that I learned about that particular number.
What are Palantir’s Customer Growth and Retention Metrics?
U.S. Commercial Growth
Palantir's U.S. commercial revenue grew by 92.5% in the second quarter of 2025 compared to the same period in 2024.
For the six months ended June 30, 2025, U.S. commercial revenue increased by 82% compared to the prior year.
The company's U.S. commercial customer base grew by 64% year-over-year.
Palantir expects U.S. commercial customers to remain a "meaningful source of revenue growth".
Customer Retention and Expansion
The average revenue from Palantir's top 20 customers was $74.7 million for the trailing twelve months ended June 30, 2025, a 30% increase from the prior year.
Revenue from existing government customers accounted for $174.2 million of the total government revenue increase in the quarter.
Revenue from existing commercial customers accounted for $86.5 million of the total commercial revenue increase in the quarter
Remaining performance obligations were $2.4 billion as of June 30, 2025, providing visibility into future revenue.
Of this amount, the company expects to recognize approximately 42% in the next 12 months, and 39% over the subsequent 13 to 36 months.
Strategic Commercial Contracts and Churn
Revenue from Strategic Commercial Contracts decreased by $4.1 million in Q2 2025 compared to Q2 2024.
For the six months ended June 30, 2025, revenue from these contracts was $10.2 million, a drop of $22.8 million from the $33.1 million in the same period a year prior.
The company explicitly states that some of these early-stage companies "filed for bankruptcy or terminated their contracts," and their remaining value was excluded from the total.
This highlights a specific form of churn tied to Palantir's investment-driven business strategy.
The Strategic commercial contracts churn part really caught my eye.
What are Strategic Commercial Contracts?
Strategic Commercial Contracts are agreements that Palantir enters into with certain customers, where the company accepts securities as non-cash payment for its software and services.
These contracts were a core part of a specific strategy from 2021 through 2022 to acquire shares of various entities, including publicly-traded and privately-held companies.
Why are they a specific churn indicator?
Their latest earnings report noted that revenue recognized from Strategic Commercial Contracts was $10.2 million for the six months ended June 30, 2025, a decrease from the $33.1 million recognized in the same period in 2024.
This decline is directly tied to customer churn and business failure. The report clarifies that some of these early-stage companies "filed for bankruptcy or terminated their contracts," leading to the remaining value of those contracts being excluded from the total contract value.
To fully understand Palantir's strategic commercial contracts, I also wanted to look at the context provided by their past SEC filings.
Here are some key points that I noted:
From 2021 through 2022, Palantir entered into "Investment Agreements" to acquire shares in various entities, including special purpose acquisition companies (SPACs), and both privately and publicly traded companies.
In conjunction with these agreements, they signed "Strategic Commercial Contracts" to provide these "Investee" companies with access to Palantir's products and services.
These contracts often involved Palantir receiving non-cash consideration, such as equity in the customer's company, in exchange for their software and services. This allowed Palantir to expand its customer base and potentially benefit from the growth of these companies.
Why is this strategy notable?
This approach was a way for Palantir to gain new customers and revenue streams beyond its traditional government and large commercial clients.
It came with inherent risks, as the value of the non-cash consideration was tied to the performance of these, often early-stage, companies.
This is why the Q2 2025 earnings report mentions that some of these customers have since filed for bankruptcy or terminated their contracts, resulting in a decline in revenue from this specific segment. This highlights a form of customer churn not typically seen in traditional subscription-based business models.
A Few Final Thoughts
Palantir had a great quarter in any way that you want to look at it.
They have continued to grow their commercial business.
They have been able to upsell their current customers and as a result increased their revenue from them.
But it’s also clear their Strategic Commercial Contracts impacted a small portion of their total revenue and really just highlights that churn comes in many forms.
It’s certainly one that I am going to be keeping an eye.
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