Palantir's success in securing AI-driven government contracts has been a major driver of its revenue growth. The company has deep ties with the U.S. Department of Defense and other government entities, leveraging its data analytics and artificial intelligence capabilities to enhance military and defense operations. For example, its recent $1.5 billion government contract for AI integration underscores Palantir’s role in modernizing defense technologies. This contract builds on previous phases where Palantir has been instrumental in projects like the U.S. Army's TITAN system, which uses data from ground and space sensors for military planning.

Palantir's strong government revenue, particularly from AI and defense-related contracts, contributed significantly to its earnings, with government business accounting for much of the company’s total revenue growth. In Q2 2024, Palantir posted a 27% year-over-year revenue increase, mainly from defense contracts, which shows its dominance in this sector. However, this dependence on government contracts presents risks, as spending priorities could shift.

At the same time, Palantir is looking to diversify by increasing its focus on commercial AI solutions. Its commercial business saw a 55% year-over-year growth in the U.S., signaling potential in non-government sectors, though the government remains its core revenue base for now.