People seem to struggle with the concept of private datacenters these days. Palantir customers tend to be the sorts of orgs that are pretty paranoid about their data, and they wouldn't be handing it over to some schmucks without being confident that those concerns were addressed. Militaries and governments generally aren't fuckin around with things like intelligence data, so I think it's reasonable that Palantir is able to make a convincing case to the world's most paranoid orgs that their data isn't being sent anywhere (and it'd likely be air gapped anyway).
Just because everything you touch is in the cloud doesn't mean other orgs aren't still building their own datacenters and then buying software to run inside.
The on prem solution is probably 2X TCO of the hosted solution. I'm sure many orgs that should be strictly "on prem" are running hosted solutions due to budgetary concerns.
