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Palanteer just released their latest quarterly figures. Amazing growth across the board, but that wasn't enough for the market. Stock is down around 3 to 4% or so at the time of recording. Yes, today's episode is a solo episode. Oh, all of that is quite fine. We will be back with more episodes over the next couple of days and of course a live stream as well on Wednesday and Thursday.
And so, let's dive a little bit deeper. Revenue for the quarter increased by 96% year-over-year. Q2 was actually 93% year-over-year growth. So, another acceleration in a revenue growth. They be the guy midpoint by $151 million. Although, it's still amazing. I think a lot of Palanteer investors would have or have predicted a 100% or 100 plus% growth year-over-year.
Myself included. Am I disappointed by 96% year-over-year growth? No, not at all. If you look at US commercial, that increased by 148% year-over-year. And for the first time ever, US commercial is a bigger business than US government. Not by much, but still. As for the part that did show some weakness, more on that a bit later, that's US commercial total contract value.
Now, let's compare this quarter to last quarter. Let's see what has been accelerating and what has been decelerating. Total revenue accelerated by 3 percentage points. US revenue 4 percentage points grew 119% year-over-year. US government 96% revenue added quarter over quarter $378 million. Net dollar retention 165%.
That's up from already a very very big number of 157. Deals of over $5 million were 107. That's up from 98. And then now have a rule of 40 of 158%. Last quarter that was 155%. Now what was decelerating that is US commercial TCV over year. We went from 153% to just 11% increase. US commercial remaining deal value quarter over quarter went from up 27% to just up 4% international although international we know that's a very very weak segment for them as of right now last quarter only grew 33% this quarter 26 adjusted free cash flow we do need to learn a little bit more about that maybe in the 10q as of right now we don't know why dropped from 63% to 53% maybe they bought some GPUs Maybe data center, who knows?
But 53% is still very good. Net new US commercial customers, 38 were added last quarter, 33. This one gap net margin 55% to now 49%. Again, still amazing stuff, but it has to be put in the deceleration bucket. And then deals over $10 million, they added 73 last quarter, 64 this one. The majority of the growth of the 96% year-over-year of course come from the US.
84% actually to be specific. 84% of revenue comes from the US. In Q2 that was actually 81%. So total revenue increased 20% quarter over quarter. US commercial increased 148% year-over-year, 29% quarter over quarter. US government 96% growth year-over-year, 18% quarter over quarter. Clearly here again, US is driving this business forward.
International not so much. And there was a clear acceleration here for US commercial that added $220 million in just one quarter was up 29% quarter over quarter. If you look at the trailing 12 months revenue per US commercial customer, that's up 88% year-over-year. And the fiscal year 2026 US commercial guides sits at least at a growth of 143% to reach over $3.55 billion.
And this is the interesting part. The net dollar retention of course increased. We're now at 165%. So clearly here the growth comes from expansions and not new logos. Per management's own comments they said that delivery capacity not demand limits new logos. Now the thing here is is that we've heard the companies say quite a lot that demand is not an issue but if demand is not an issue and you see so much demand but you cannot grab it or translate that into revenue again they're growing almost 100%.
But it it does it does feel like they're leaving quite a lot of money on the table. And what's the reason for it? Do you need more FDE? Do you need more experts? What's the what's the solution to continue this acceleration in growth? Now, of course, right now, since they are growing so quickly, we don't mind.
But if they were to experience a real deceleration in growth going forward, because you will see next quarter, yes, the growth is down a little bit, but they're still beating analyst expectations. But if they are seeing so much demand, it does feel like they're leaving quite a lot on the table and it should be an easy fix because at the end of the day selling software it's not that complicated.
Moving on to the part where we do see a little slowdown and that's in bookings. So according to management several eight figure deals were shorter in duration than usual as customer adopted sovereign AI quickly. management expects contract duration and size to rise. This also explains the dip in the long-term RPO.
RPO being remaining performance obligations. Now, before we continue, if we zoom out and look at what has happened with this company over the past couple of quarters, because according to Alex Karp, the the numbers that we should be or the number that we should be looking at for 2028 for US commercial is $15 billion run rate.
And so I know the number seems quite big, but look at where the company was not that long ago. And look at that acceleration in growth. This is for government revenue. If we then switch to the commercial revenue, not US, just overall commercial revenue looks even better. A real acceleration and explosion in growth.
This is already the second consecutive quarter of doubling year-over-year. More than doubling actually year-over-year. If we then have a look at US government, which is this pink one right here, and US commercial revenue, look for the first time, we now have US commercial, that is a bigger business than US government.
Again, not by much, but still not bad at all. Look at where US commercial was 3 years ago. 3 years ago it was almost half of US government and now it is a little bit bigger and of course growing much faster. Looking ahead at next quarter's revenue, this is what the market is expecting. 74.6% growth year-over-year.
Well, Palanteer is expected to grow closer to 90% year-over-year. So even with this deceleration in growth maybe baked in by the market well clearly Palanteer is expected to grow much faster than that. If we then have a look at the upcoming quarters look the market is expecting this business to see a deceleration in growth.
It's still expected to grow by quite a lot right these are growth rates above 50%. And if we look at the yearly growth rates again for this fiscal year market is still not where Palanteer guided for. If we look at next fiscal year 50% growth year-over-year then 44.3% in fiscal 28 to reach 17.8 billion but Alex Karp said $15 billion run rate 2028.
Let's even say it's for the end of 2028. He was only talking about the commercial side of the business. So yes on paper piloter might look extremely expensive if you look at forward multiples but the forward multiples are based on analyst forward-looking expectations and clearly analysts have been wrong on the downside.
Now, of course, Palanteer revenue-wise and market cap wise, still a very very big difference. But when you look at the growth rates and then you mix that with the profitability of the business, it starts to make sense because yes, at this rate, Palanteer grows into the valuation quite rapidly while also generating quite a lot of cash, builds their cash pile, then eventually, yes, eventually they'll probably be buying back quite a lot of shares over the long run.
Now, as we've discussed, adjusted free cash flow, the dollar amount was basically flat quarter over quarter, but that means that margins were down a little bit from 63% to 55% and again 55% free cash flow margin still very good. And yes, the adjusted part is to include this very very small part in stockbased compensation, but they still ended the quarter with $10.4 4 billion in cash and US treasuries with no debt.
Moving forward, Palanteer is still expecting to grow quite a lot. And as we can see, they keep raising their fullear guidance. We started off with 61% then 72, then 82% growth. We're now at 91% yearover-year growth. Palanteer likes to put out targets and beat those targets. And so if we were to look at the $15 billion US commercial run rate target for 2028, there are a couple of scenarios here.
Let's just stick with the Q4 2028. How would that look like? Well, it's eight quarters from today. That means we should see an average of 15% growth quarter over quarter, which should equal around 75% growth yearover-year. It is possible, right? It is possible over the last eight quarters US commercial the average US commercial growth quarter over quarter was 24%.
of course smaller base and so right now if I look at achieving 15% it is possible if they would like to achieve it a bit earlier then yes the growth rate will need to be a bit higher but as of right now if we just assume it's for Q4 2028 I think this is achievable and remember we're only talking here about the US commercial run rate no government and yeah no international either.
So the numbers yeah the number by the end of 2028 maybe exit rate is going to look quite interesting and when you start to think about that yeah maybe the stock is not that expensive today but of course as you know and as you can see here from the heat map whatever is linked to AI hyper growth semiconductor this type or this side of the trade is not getting a lot of love nowadays.
If we look at what has happened over the past week and the picture is getting even clearer. But all in all to summarize this quarter for Palanteer, it's another excellent quarter by the company. It is one of the fastest growing companies out there. Very, very profitable as well. It's super expensive for some.
It is fairly valued for others. I don't think there is a middle ground as of right now. Let me know what you think down in the comment section below. Like, subscribe, do all of that. And we shall see each other in the next one. Bye-bye.
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