The Death of the Pilot Program
Palantir just reported a monster quarter - revenue up 70% year-over-year to $1.41 billion - but the real story isn’t the headline number. It’s the death of the “pilot purgatory” that has plagued enterprise AI for years.
For a decade, selling AI to big companies was a slog: months of convincing, months of data cleaning, and months of “proof of concept” trials that often went nowhere. Palantir’s 137% surge in U.S. commercial revenue proves that era is over. CEO Alex Karp calls it “commodity cognition.” The AI models themselves (the LLMs) are becoming cheap utilities. The value has shifted entirely to the application layer - actually getting the model to do work in a factory or a supply chain. Companies aren’t “testing” AI anymore; they are panic-buying infrastructure because they realize a raw model is useless without a nervous system to control it.
The “Rule of 40” on Steroids
In software investing, the “Rule of 40” (Revenue Growth + Profit Margin) is the gold standard for a healthy company. A score of 40% is great. Palantir just hit 127%.
This is absurd. It signals a fundamental breakage in the traditional tradeoff between growth and profitability. Usually, to grow 70%, you have to burn cash like crazy on sales and marketing. Palantir is growing that fast while expanding margins (adjusted operating margin hit 57%).
The non-obvious insight? Palantir’s “Bootcamps” have replaced the traditional sales cycle. Instead of a salesperson buying steak dinners for CIOs, engineers show up, build a working product in 10 hours, and the customer signs a contract the next day. They have successfully productized the sales process itself.
The “N of 1” Moat
Finally, look at the guidance. They are projecting 61% growth for 2026. Most software companies guide conservatively to “beat and raise.” Palantir is effectively telling the market, “We have no competition.”
Karp’s claim that they are an “N of 1” (a market of one) sounds arrogant, but the data backs it up. While other SaaS companies are scrambling to add AI “copilots” to existing tools, Palantir built the operating system first and is now just plugging AI into it. They aren’t an AI company; they are a legacy data plumbing company that accidentally built the perfect housing for the AI revolution ten years too early. Now, the market has finally caught up to them.