Palantir's AI Business Gains Ground as Commercial Revenue Surpasses Government Sales

Enterprise demand is reshaping the company's revenue mix, with commercial customers contributing more US revenue than government contracts for the first time.

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Government and defense contracts have long been central to Palantir Technologies' business, but its latest earnings show that companies are becoming just as important to its growth. Demand for its AI software has pushed its commercial business to new levels, bringing a change in the revenue mix that has defined the company since its early years.

For the quarter ended September 30, 2026, revenue reached $2.313 billion, up 96% from the same period last year. US commercial customers contributed $984 million, compared with $953 million from government contracts. Commercial revenue increased 148% year over year, while government revenue grew 96%. It was the first time commercial revenue had moved ahead of government revenue in the company's US operations.

Much of this growth comes from businesses looking to use AI within their existing operations. Palantir's Artificial Intelligence Platform (AIP) allows organizations to connect AI models with internal data and operational systems, while its Foundry platform provides tools to manage and analyze information across different parts of a business. For companies with information spread across multiple departments, this offers a way to bring AI into existing workflows rather than relying on separate applications with limited access to internal systems.

Control over data and infrastructure is another part of the company's commercial offering. Its sovereign AI approach is aimed at organizations that want greater control over how AI is deployed, particularly when dealing with sensitive business or government information. Its expanding customer base provides some indication of how far the business has moved beyond its traditional market. By the end of September, Palantir had 686 US commercial customers, up 29% from a year earlier.

Commercial growth and the contracts behind it

The company closed 212 deals worth at least $1 million during the quarter, reflecting continued activity across its customer base. Total contract value reached $2.918 billion, up 6% from a year earlier, while US commercial contract value increased 11% to $1.463 billion. Remaining deal value in the US commercial business reached $6.517 billion, an increase of 79% year over year.

However, new contract growth has been slower than the rise in commercial revenue. US commercial contract value increased 11% during the quarter, compared with 148% growth in revenue. The difference suggests that investors will be looking closely at whether the current pace of sales can be supported by a steady flow of new business.

Growth outside the US has been more moderate. International commercial revenue reached $184 million, up 21% year over year, while international government revenue increased 31%. The contrast with the US figures shows that commercial demand remains concentrated in Palantir's home market, even as its international operations continue to expand.

The company is also generating substantial profits alongside its rising sales. GAAP operating income reached $1.085 billion, while net income attributable to common stockholders was $1.128 billion, compared with approximately $476 million in the same quarter last year. Adjusted free cash flow stood at $1.216 billion, and Palantir ended September with $10.4 billion in cash, cash equivalents, and US Treasury securities.

Higher expectations for the final quarter

Following the results, management raised its full-year 2026 revenue forecast to between $8.530 billion and $8.534 billion, representing expected annual growth of approximately 91%. US commercial revenue is now expected to exceed $3.559 billion, which would put growth in that segment at 143% or higher. For the fourth quarter, the company forecast revenue of between $2.649 billion and $2.653 billion.

The higher forecast comes as both commercial and government customers increase their spending. Palantir now has a larger presence in the enterprise software market, but maintaining that growth will depend on whether customers continue expanding their use of its platforms and whether initial deployments develop into longer-term contracts.

Competition is also growing as established software providers and AI developers pursue the same enterprise spending. Businesses have more options for introducing AI into their operations, and Palantir will need to demonstrate that its platforms can deliver lasting value beyond initial deployments. Its latest results show that commercial demand has become a major source of revenue, while the coming quarters will provide a clearer picture of how much of that demand develops into sustained business.

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