Palantir Technologies (PLTR 3.73%) published fourth-quarter earnings results after the market closed on Monday and delivered a sales performance that beat the market's expectations. While the company's non-GAAP (adjusted) earnings per share of $0.08 were in line with Wall Street's target, sales of $608.4 million came in better than the average analyst's estimate for revenue of $602.4 million. Investors responded by flocking to the stock as its price surged over 25% within the first hour of the market opening on Tuesday.

The combination of better-than-expected revenue and encouraging forward guidance is powering big gains for the artificial intelligence (AI) stock. Palantir's revenue rose 20% year over year in the fourth quarter. Sales were also up 9% on a sequential quarterly basis. The results came in significantly better than anticipated, and they look even more encouraging given the business's rapidly shifting sales makeup.

Palantir's private sector wins point to an exciting future

Revenue for Palantir's commercial segment grew 32% year over year to hit $284 million. Meanwhile, revenue from U.S.-based private sector customers was up 70% compared to the prior-year period and reached $131 million.

Notably, Palantir got its start providing counterterrorism software to public sector customers. With $324 million in sales to government clients, the public sector segment still accounted for roughly 53% of overall revenue. But sales to private sector customers are growing much quicker, and investors should be excited about the shift.

Palantir's private sector segment will soon account for the majority of its sales. Because sales to commercial customers are growing much faster than sales to government customers, the change in sales makeup suggests that overall revenue growth will continue to accelerate.

Much of the strong private sector growth appears to stem from the company's Artificial Intelligence Platform (AIP). The new software suite debuted in May and is off to a very strong start.

Palantir has been conducting "bootcamps" to show private sector customers what AIP can do. These training sessions are converting customers at an impressive rate. Here's what CEO Alex Karp said about the early success of the platform and its bootcamps on the Q4 earnings call:

You also see just this enormous demand and our ability to meet that demand with a pilot -- new piloting approach that we call bootcamp. ... Two years ago, we did 92 pilots. And last year, really mostly the second half of the year, we did over 500 bootcamps. I go around the country now telling CEOs, CTOs, and really, whoever has $1 million to buy our product and transform their enterprise, take everything you've done in AI since you started, put your best people on it, and we're going to show up at any time you want, and we're going to run your data at a bootcamp for 10 hours.

Karp went on to suggest that bootcamps for AIP were showing that the software was capable of delivering results in 10 hours that often compared favorably to what businesses would otherwise be producing over 10 months. Demand for AIP helped Palantir close 103 deals worth over $1 million in Q4.

Palantir's financial performance continues to impress

In addition to better-than-expected sales growth, Palantir also posted very impressive margins in Q4. The company posted an adjusted operating margin of 34%.

Meanwhile, the AI leader posted $93 million in net income -- up approximately 200% annually and good for a margin of roughly 15%. The performance marked the business's fifth consecutive quarter of profitability according to generally accepted accounting principles (GAAP). Perhaps even more impressive, the company posted adjusted free cash flow of $305 million in the period -- coming in at approximately 50% of overall revenue.

Palantir closed out last year with $2.23 billion in sales, up 17% annually. For the current fiscal year, management is guiding for sales to come in between $2.652 billion and $2.668 billion -- representing growth of 19% at the midpoint.

Sales from U.S. commercial customers are expected to grow at least 40% annually and reach more than $640 million. Meanwhile, total adjusted free cash flow is projected to come in between $800 million and $1 billion -- representing a margin of 33.9% at the midpoint.

The business's near-term performance outlook looks quite strong, and the long-term picture is even more encouraging.

Palantir is poised to score massive AI wins

The strength of Palantir's AI software is powering massive revenue growth in the private sector. With sales to commercial customers expanding rapidly and set to become the majority of overall revenue in the near future, there's a good chance that the business's sales growth will continue to accelerate next year.

The software specialist's early leadership position in the artificial intelligence industry could establish the foundations of incredible long-term performance. As Karp said during the company's Q4 conference call, "This is a revolution for incumbents that have distribution and already strong products, which is why we're massively outperforming." It looks like Palantir's revolution is still just beginning.