# Alex Karp Leaves Audience Speechless on Palantir's Q2 Earnings Call

*David Carbutt * · https://www.youtube.com/watch?v=75lboM5zqos

## Summary

This is Palantir's Q2 earnings call, featuring CEO Alex Karp celebrating 93% aggregate growth and just under 150% US commercial growth. Karp frames the results around Palantir's sovereign AI stack, warning enterprises against handing their IP and alpha to frontier model providers. He also discusses the sovereign boot camp, Palantir's outsider identity, and model lock-in risks before closing with remarks to individual investors.

## Key points

- Karp cites 93% aggregate growth, just under 150% US commercial growth, and 115% aggregate growth in America.
- Palantir is extending the AIP stack for sovereign AI, including fine-tuning models on Nvidia infrastructure where customers own the weights and the alpha.
- Karp warns that enterprises using frontier models without protection are transferring their IP, know-how and expertise to third parties who may compete with them.
- A sovereign boot camp drew an unexpectedly heterodox group of executives, including older customers who now want to migrate across the stack beyond Foundry.
- Karp attributes Palantir's positioning to full alignment with partners and to the company being a 'colony of believers and artists' making non-playbook bets.
- Palantir already offers a product across the US government that lets customers switch out models, avoiding lock-in to any single lab.
- Ryan and Shyam emphasize converting tokens to value, building benchmarks that reflect the customer's actual business, and automating model evaluation.
- Karp tells individual investors their support was crucial and that Palantir will become a much larger company.

## Notes

### Results
- 93% aggregate growth, just under 150% US commercial growth, 115% aggregate growth in America.
- Rule of 40 cited at 155; 62-63% free cash flow margins; NDR described as anomalously strong.

### Origins and philosophy
- Palantir began serving US government partners, working with NLP before AI existed.
- Karp says Palantir rejected the Silicon Valley "parasitic" model of extracting client money without adding value.
- Products built over the years: PG, Foundry, Gaia, Maven, Ontology, AIP.

### Sovereign AI
- AIP stack is being extended for sovereign AI: orchestrating and fine-tuning models so partners get a completely sovereign stack.
- Partnership with Nvidia; fine-tuned models in classified environments outperform frontier models, and customers own the weights and the alpha.
- Karp warns that unprotected interaction with frontier models lets third parties migrate your IP, know-how and expertise into their models to build a business that doesn't require yours.

### Sovereign boot camp
- Organized after the AI revolution exploded; drew CEOs, operational leads, and people Palantir hadn't worked with before.
- Big educational demand: contracts, open vs closed weight models, how ontology works with the compute stack.
- Older Foundry-only customers now want Ontology and the sovereign AI stack.

### Why Palantir got it right
- Karp credits full alignment with partners, artistic insight, and outsider status; calls Palantir a "colony of believers and artists."
- Supporting some European institutions is against Palantir's economic interest but continues out of belief.

### Model lock-in
- Palantir already has a product across the US government to switch out models.
- Shyam: benchmarks have little to do with customers' businesses; vanilla Nemotron Ultra beat frontier models on real tasks within 24 hours.
- Focus is converting tokens to value and automating model evaluation on an empirical basis.

## Transcript

[00:52] Obviously, we are loving these results and um uh loving what they mean for our customers and and broadly speaking the West. Um so reflections on how we got to 93% aggregate growth, just under 150% growth in US commercial and an aggregate growth of 115% in America, which is astonishing, uh even surpassing the already anomalous results we've posted in the past and at a very significant scale. Um And and this the the the story really does begin uh at the beginning when we dedicated ourselves to our most important partners in the US government and we we built products to deliver value for them. We delivered those uh value for those for them by looking at the world in its naked state. We did not have uh soft We did

[01:52] not have AI available. We had to work with NLP. So, we had to develop forward to play uh engineer model to extend the technology and deliver value. The The nascent version of ontology was developed. Sham, Aki, others strapped Blackberries around their head and made the code work in sensitive environments. And what we learned and what was built into this company is that there are there are things, values, structures that are more important than purely uh extracting value from a client. And we rejected the the way in which we were being taught in Silicon Valley to build a software company at the time. Palantir, of course, is now both infrastructure software FTEs, orchestration, and business know-how. So, it's a completely

[02:41] different hybrid. But at the time, we were being told our job was to trick the clients into giving us money for something that made them attached to us, but really uh really added no value. So, essentially a parasitic model. Um and in the rejection of that, we fully aligned with our partners. Now, we To do that, as we went through the years, we built we built PG, Foundry, Gaia, Maven, Ontology, AIP. Now, we're taking the AIP stack and extending it for sovereign AI, which requires us to be able to orchestrate and fine-tune models to provide a completely sovereign stack to our partners. But what What is the philosophical importance of that? We are offering a present that that augurs to a future that we want to

[03:30] live in. What does that future look like? We have more rights in the PG frame, there's it's safer. In the sovereign AI frame, which is arguably by far the most important because, you know, all these other things are downstream from GDP growth and GDP health. And what if we transform America into the only democracy that actually grows, where the where production is more efficient and manufacturing actually happens. What is that frame? That frame is not uh you are going to buy into a future where you have no job, where adversaries win, and everybody who does win is a small tiny group of people living in a tiny place that somehow believes because they eat vegetables and they don't support war fighters that

[04:13] they deserve to have the total means of production of this country, uh and the rest of us should just sit by back and absorb the cost of that revolution, which we're paying for. How are we paying for it? In the in the enterprise context, people sign up for token uh self-pleasurings, and those that and that at a real cost like other forms of self-pleasuring. Where you are paying for the right for them to migrate your IP, your know-how, your expertise to their model so that they can build a competitive business that doesn't require your business, your people. And why are they doing it? It's actually being done for what they believe are moral reasons. They are superior to you. They deserve to colonize your enterprise. You deserve to

[04:56] be colonized. And in Palantir, in A, it's interesting, it doesn't work as well or as efficient purely on the alpha side as having an application layer owning your compute witness we built a partnership with Nvidia. We're expanding our application layer. We are going to enter the market and already entering in the classified space as Sham alluded to of of fine-tuning models. So, the models actually fine-tuned by us in our enterprise on Nvidia stack outperform frontier models. And you own the weights. You own the alpha. You own everything. Every single enterprise in this country is going to either look at doing this, find ways of doing it, or at least avoid the alternative of unprotected interaction with frontier

[05:40] models. This is very dangerous. You're warned about this in high school. And now you're learning about it in your enterprise. And in Palantir, we are at the front line we are in the front of driving this revolution. I am driving the business to grow at a rate equal or above to what we have in US commercial for the next 18 months, which is a very high goal, but it is one we can actually get to because we are fully aligned with what's right and what's good and what actually works well in an enterprise. And for the first time, people believe us. And if you didn't believe us, you can believe 149% growth in the US, a rule of of of of 40 that's 155, 93% aggregate growth, and 90% growth uh in US com with 62-63%

[06:27] uh free cash flow margins. People thought we wouldn't be profitable. So, this is one of the more exciting times to be at Palantir. It's one of the more exciting times to participate in Palantir. And for everyone on the sidelines, you got to get off the sidelines. This is a revolution that will affect the sovereign revolution, where you stand in it, will affect your livelihood, the livelihood of the people you care, and whether America and the West win. We cannot regress to a thin philosophical model where only a small group of people who think very differently than most of us actually absorb all of the revenue and value in our business and transfer all of the dangers to us. And that's what this revolution is

[07:07] about, and it's extre- extremely motivating for those of us at Palantir. Thank you. >> Thanks, Alex. Our first question is from Dan with Yorkville Ives. Dan, please turn on your camera, and then you'll receive a prompt to unmute your line.

[07:30] >> Where's the prompt? >> [clears throat] >> Well, while we're waiting, you can be entertained. >> Maybe we can circle back to Dan. Um our next question is from Mariana with Bank of America. Mariana, please turn on your camera and then you'll receive a prompt to unmute your line. >> I think I'm good. Um, thank you. Can Can Can you walk through this at the the sovereignty boot camp? What did you learn with talking to customers that maybe you weren't expecting? I mean, obviously just an overwhelming sort of group of executives. Can you just talk about that, Alex? >> Well, first of all, yeah, for those of you not in the know, we we we did a sovereign boot camp after this kind of revolution exploded. Um, and just to

[08:16] give the backdrop here, you know, 2 years ago, we were said we we spent four or five months, Sasha who runs this, organizing AIP Con. This was much more like, "Hey, let's invite our buddies over to lunch." And then all of a sudden we start getting bombarded by people, people we invited, people we didn't invite, all levels of the business. So, like when you're working in enterprise, it's really important that the operational people are interested. So, it was like CEOs, operational leads. Um, and there's a a huge educational component and Cham talks about this a lot. Like we people understand that they need a way of controlling their alpha. They understand broadly that token maxing is at their own cost and they

[08:55] certainly understand that token maxing is leading to them transferring their data, their prompts, the way they run their business, their expertise to a third party. Um, but they don't they they need education on what they can do about that with us, preferably, but also without us. How do you do contracts? How do you How do you work with How do you work with open weight models? How do you work with closed weight models? How does this work in ontology? Is Is ontology the protective layer that they that they they've been told? Does it create value the way they How would this look in their own business? And how would they would they How would they work with the compute stack? And so, there's a just

[09:29] this massive demand and we're in the business of educating people, both our customers and others. But it was a super heterodox group of people both in terms of the kind of people showed up, the demand for it, and also people we've not worked for. By the way, you know, one of the reasons the NDR number is so strong, it's ridiculously strong. I mean, that people always write these things about customer adoption and maybe, you know, but the NDR number is anomalously strong. It it That is also going to shift in a even as as hard as it is to believe, become even more positive because some of our older partners we haven't really interacted with, they also showed up. They're like, "Okay, now we now we get

[10:07] why we would need you." And not just Foundry, they're migrating across our stack. So, customers that were only using Foundry now want Ontology, now want to be part of the Sovereign AI stack. I would say last not least, you're asking the internal version, external version, internally, recruiting, retention, excitement at Palantir. It's it's I mean, I'm very excited. I think the people around this table are very excited. Uh the the legal department is excited. This I mean, that hasn't happened since like that doesn't happen. Like, they're out like "Rock on." >> [laughter] >> Uh so, it's just it's more fun. You know? Uh so, yeah, there's just it that that's the way this went down. And I think this is going to this is the way

[10:51] beginning. So, you the way the way at least we think about this internally is what portion of the market is available to people who want to create value, mean create value and keep it. That portion of the market has gone from a small portion of the market where we are we we're doing where till like a large large part of the US GDP. And that's why we need partners. Behind the scenes now we're trying to find partners. Now, partners we need technically exceedingly competent partners. Partners doesn't mean have We don't have to agree on every issue. We don't even have to agree on every client. They can occasionally compete against us. We've seen this in the defense tech stuff. Stack and Sham, you know, like the approach to defense

[11:30] tech where we partner with people. Partner doesn't mean we agree, sometimes we compete, but it means we're marching in a similar direction that allows us to scale. So, those things are going to be a very big important part of like essentially the guide. Why am I pushing the company to to grow not to the just to the end of the year, but next year? It's because that also forces us to to find ways to scale to meet the demand that's out there. >> Thanks, Alex. Our next question is from Mariana with Bank of America. Mariana, please turn on your camera and then you'll receive a prompt to unmute your line. >> Good afternoon, everyone. >> Hello. >> So, a follow-up to to Dan's question. When all this AI revolution started,

[12:15] right? It was really clear for enterprises that data and proprietary data and how you train your models was going to be the key. But then, we're like 3 years into that revolution and now everyone started to realize, oh, owning my data and what I really learn from my data is important. What happened there? Why you think that you positioned yourselves back then in a different approach to AI that enterprises weren't able to see? And why these numbers that reflect that you're the winner of AI today, it wasn't that clear for any other software application back then. >> Well, you can kind of divide it up into two parts. There's the first part is efficacy, you know, and then the second part is efficiency. That's not the quite

[13:00] the right word, but it's like how do you scale it? In the zero to one phase, it's much more important to focus on the application layer. Like, okay, this new thing has happened. How do we turn that into economic value? And then as people started to experience the economic value and as time started happening, you started to see that some of the people who were partners out there were building things that were competitive to you. And I think that took some time to kind of seep into the psyche and mindset of, wait a second, this is maybe not you know, now I know this thing is valuable in the right hands on the right platform, but I also am going to need to control the weights. That the alpha that

[13:34] is being generated isn't simply the data that's resident in my enterprise. It's also the metadata, the reasoning traces, the exhaust, the usage of this, which I don't yet have mechanisms to control. And now I understand that's actually probably more valuable than just the data in my enterprise. And that's been a clarion call, I think, for for the market over the last quarter, two quarters. >> There's the there's also the clash question implicit in your question is, you know, why did we get this right? And, you know, again, I think it's we are actually fully aligned with our partners. Sometimes we make decisions like, you know, that are against our economic interests. Like, we're supporting lots of institutions in

[14:17] Europe. The growth sucks. I mean, clandestine institutions. But, without our products, they would have rampant terrorism and their problems, their migration problems, and the results would be 10 times worse. It's not actually in our economic interest anymore to do this, but we still do it. And this is because we actually are believers, for better or worse. I would say also, um, this is a company that from beginning, from inception, has valued artistic insights. Meaning, you can't model something purely on science. You have to have an aesthetic or artistic appreciation for it. And we've made huge bets, everyone at this sitting at this table, and many, many hundreds of people at Palantir have essentially artistic insights. We've

[15:00] always viewed ourselves, we've always said we're a colony of artists, and people assume that means we're just difficult. And that's also true. But, you know, it's it's also we value insights that are way before anyone else would see them. And we build major parts of our business. That's very hard for normal business to do because, I mean, one of the jokes running around Palantir is we can we can definitely meet our guide next year if we get paid for all the people copying us. You know, so even we got a small portion of people copy you know of the of the of the of the funds for the copyers, we do very well. Normal businesses, again, no critique here, are built around there was a playbook, we execute on that playbook,

[15:40] and we're in a non-playbook world. So, executing on a playbook that worked 5 10 years ago essentially build parasitic software and monetize it, that doesn't work now. And there's hundreds of variants of that, but that is a central advantage we have. We are a colony of believers and artists that are very motivated to drive value. And that sets us aside much more than I would have imagined 10 years ago if you'd asked the same question. And it and then luckily for us, this is capitalism. I mean, DSA wants to get rid of it, but until they do, you got to look at the results. Because if our results and and the other thing I'll tell you that's very special for us, we are outsiders. Outsiders, like you're an outsider. You

[16:22] come to this country, you better have really good results. You know, and like the same thing with Palantir, we know we need the best results cuz people aren't buying our product because we're swinging the golf club correctly or paying for the steak dinner. They don't even invite us to steak dinners. So, that's and that outsider status has caused huge problems but in the first 18 years, but a lot of benefits in the next 18 years. And other people don't like being outsiders. I'm I'm You know, in fact, I'm struggling with our current popularity. >> Thank you. Our next question is from Gil with DA Davidson. Gil, please turn on your camera and then you'll receive a prompt to unmute your line. >> Thank you, Ryan. The topic of

[17:08] sovereignty, you focused a lot on how dangerous it is to give the keys to the labs because they could choose to compete with you. Is there another aspect of this as well though that if you choose a lab and you buy the orchestration and the consulting and the harnesses from them, you're beholden to their models and if something happens, if it's not the best model anymore, if the model gets pulled, then you as a customer are stuck and you may have a mission critical system fail and this isn't hypothetical. This happened a couple of times this year where one of the frontier models got pulled by either the government or or the company. Well, if you work with Palantir, it I would assume that when that happens, you can go to your

[17:52] customer and say, "Hey, if that model doesn't work, I can plug in another model for you." >> Now, I mean, I'll let Ryan and Shyam comment here, but we're already doing that across the USG, US government. We have a product that allows you to about switch out models. I've Look, at the end of the day, if if you are locked into a product, you're going to I mean, that's the nature of monopoly capitalism. That that's why people want the lock-in cuz then they can raise the prices and reduce the quality. We're against that because we're on the side of the American worker, the American people and its great institutions and other institutions across the West. Um but yes, there you know, and enterpr- people

[18:27] are running big enterprises in this country are very sophisticated. They're aware of these risks and they don't like people who are kind of flaunting like setting this up so that they feel they're being made fun of or they're being they're sucker, basically. So, there's a lot Honestly, there's a lot of anger here. I spend interestingly a fair bit of my time trying to explain to people that, you know, some of the people involved in these things are not the caricatures they think they are, but because the business setup looks like heads I win, tails I win and American business people don't like that. But then, I don't know, there's a lot of things on the contractual front that would that would support that.

[19:05] >> Yeah, I would say like that's, you know, our whole focus is converting tokens to value. The example Shyam gave, uh that's happening across the board in the conversations with customers. That's why they're looking to expand to convert how they position themselves in the industry with us in their industry. And so, we're seeing like extreme alignment. It's not about being beholden to one model, it's about being bringing the right models to bear for the right purposes. And our contracts, our structures are set up to do that to support and compound their alpha in the organization. >> I think you know, I mentioned it earlier, but you're going to see this like we've been beholden to a small number of benchmarks that people have

[19:39] been designing models to and then releasing models saying like look how well it does on this benchmark. But the benchmark has actually almost nothing to do with your business. Well, so how do you figure out how to make the benchmark that represents your reality, what you're trying to succeed at, what you're trying to get better at, and then see what model makes sense. And the natural consequence of doing that, even even leaving aside all of your other arguments for sovereignty, it's like oh, how do I how do I climb that hill? How do I figure out what it is that I do as a business that I feed back into weights that I can control, which presupposes an open model and sovereignty. And then you're not just going to do that where

[20:12] you're waiting, hey, maybe I'll switch it out when this model gets pulled, when the rug gets pulled out from underneath me. You're actually going to be leveraging the automation to do that constantly to figure out when you have a next checkpoint that you can pivot maybe there's a new model. I I mentioned the example I I literally almost felt gaslit when within 24 hours of getting Nemotron up with no post training. This is vanilla Nemotron Ultra. It did better than Frontier. You know, if you just looked at the numbers, you would say, well, it's nowhere near the Frontier. That shouldn't even be possible. But of course, the benchmarks are wrong. I mean, the benchmarks are right for what the benchmark's measuring, but that's

[20:44] not my business. Those are not the tasks my customers had that they were trying to solve. And so then moving this to an empirical basis is I think is is how we're going to accelerate the realization of tokens to real economic value. >> Thank you. Alex, as always, we have a lot of individual investors on the line. Is there anything you'd like to say before we end the call? >> Well, you know, uh Uh, your support has was crucial to getting us this far and uh, you know, crucial to getting us to where we're going to go, which is a much much much much larger company. Um, this is one of the most exciting times to be involved in the Palantir mission. Um, we are going to help transform especially this country but allied

[21:25] countries both in commercial and government and uh, this sovereign frame that is we're using as our organizational principle is the one that is inclusive of everybody who wants to have a better world today and tomorrow and we invite everyone to engage with it in some form and thank you.