Contribution Margin From 12% to 78%Wide moat

Palantir Technologies (PLTR) — moat facet

Palantir's contribution margins went from 12% and 15% in 2018 to 71% and 78% in 2026, which is what embedded customers look like in an income statement.

The clearest change in Palantir's economics is in its segment contribution margins. Contribution is revenue less cost of revenue and sales and marketing, excluding stock-based compensation1. In 2018 the government segment's margin was 12% and the commercial segment's 15%2. In the second quarter of 2026 they were 71% and 78%3.

Commercial segment contribution margin (%)15%201851%202050%202260%202466%202578%Q2 2026Palantir Forms 10-K FY2020, FY2022, FY2024, FY2025; Q2 2026 Form 10-Q
From 15% to 78% in eight years.

The change came in two steps. Margins jumped from 23% and 20% in 20194 to 57% in government and 51% in commercial in 20205, then held near 60% for four years before rising again. In 2025 both segments reached 66%6.

The commercial segment has now overtaken. In the second quarter of 2026 it produced $734.9 million of contribution on $945.4 million of revenue, against $701.1 million on $990.0 million for government7.

These margins are the moat's footprint in the accounts. A customer who is embedded costs little to serve; a customer who expands without a new sales campaign costs almost nothing to grow.

In dollars the change is larger still. Total contribution was $1,245.6 million in 2023, a 56% margin, $1,719.9 million in 2024 at 60% and $2,942.7 million in 2025 at 66%8. Contribution more than doubled in two years on revenue that also doubled.

Everything here turns on the commercial margin. At 78%9 it is near what software can earn after the cost of hosting and selling; a fall below 70% would mean commercial growth has started to require discounts or heavier support.

Moat trajectory: Widening

Commercial contribution margin 78% in Q2 2026 from 64% a year earlier.

The number that tests this moat
Reported
Commercial segment contribution margin, latest quarter
78% (Q2 2026); 64% a year earlier

What an expanding commercial customer earns after serving and selling; below 70% would mean growth needs discounts.

Source: Palantir Form 10-Q, Q2 2026 ↗
⚠ Threats to the moat
⚠ THREAT 01
What Contribution Leaves Out
Palantir's 78% segment margin is measured before research, overhead and stock pay, which together took its 2025 operating margin down to 32%.
References
  1. ReportedContribution is revenue less cost of revenue and sales and marketing, excluding stock-based compensation.
    Palantir Technologies Form 10-K for fiscal 2025 - Item 1 business: platforms, employees, competition, pilots and government programmes. — FY2025 · publ. 17 February 2026 · source ↗
  2. ReportedIn 2018 the government segment's margin was 12% and the commercial segment's 15%.
    Palantir Technologies Form 10-K for fiscal 2020 - the direct listing, segment contribution for 2018-2020, revenue by country and employees. — FY2020 · publ. March 2021 · source ↗
  3. ReportedIn the second quarter of 2026 they were 71% and 78%.
    Palantir Technologies Form 10-Q for the quarter ended 30 June 2026 - segment revenue and contribution, US revenue, remaining performance obligations, top-twenty customers and share count. — Q2 2026 · publ. 4 August 2026 · source ↗
  4. ReportedMargins jumped from 23% and 20% in 2019 to 57% in government and 51% in commercial in 2020, then held near 60% for four years before rising again.
    Palantir Technologies Form 10-K for fiscal 2021 - the 2018 court ruling, segment contribution for 2019-2021, top-twenty customer revenue and the government fiscal year. — FY2021 · publ. February 2022 · source ↗
  5. ReportedMargins jumped from 23% and 20% in 2019 to 57% in government and 51% in commercial in 2020, then held near 60% for four years before rising again.
    Palantir Technologies Form 10-K for fiscal 2022 - segment revenue and contribution for 2020-2022, US revenue for 2020-2022, US government revenue for 2021-2022, strategic commercial contracts and investment losses. — FY2022 · publ. February 2023 · source ↗
  6. ReportedIn 2025 both segments reached 66%.
    Palantir Technologies Form 10-K for fiscal 2025 - Item 7 MD&A and segment note: segment revenue and contribution, revenue by geography and customer concentration. — FY2025 · publ. 17 February 2026 · source ↗
  7. ReportedIn the second quarter of 2026 it produced $734.9 million of contribution on $945.4 million of revenue, against $701.1 million on $990.0 million for government.
    Palantir Technologies Form 10-Q for the quarter ended 30 June 2026 - segment revenue and contribution, US revenue, remaining performance obligations, top-twenty customers and share count. — Q2 2026 · publ. 4 August 2026 · source ↗
  8. ReportedTotal contribution was $1,245.6 million in 2023, a 56% margin, $1,719.9 million in 2024 at 60% and $2,942.7 million in 2025 at 66%.
    Palantir Technologies Form 10-K for fiscal 2025 - Item 7 MD&A and segment note: segment revenue and contribution, revenue by geography and customer concentration. — FY2025 · publ. 17 February 2026 · source ↗
  9. ReportedAt 78% it is near what software can earn after the cost of hosting and selling; a fall below 70% would mean commercial growth has started to require discounts or heavier support.
    Palantir Technologies Form 10-Q for the quarter ended 30 June 2026 - segment revenue and contribution, US revenue, remaining performance obligations, top-twenty customers and share count. — Q2 2026 · publ. 4 August 2026 · source ↗
Sources
Generated September 25, 2026