When you think of stocks that have had immense success over the past year, it's hard not to think of software company Palantir Technologies (PLTR -0.98%). In that time, its stock is up around 400%, far more than the S&P 500 (^GSPC -0.43%), which is up around 14%, or any other S&P 500 stock in that span.
Like many other stocks, Palantir has been a huge beneficiary of recent artificial intelligence (AI) hype, but there seems to be a specific reason Wall Street has increasingly become obsessed with the stock: the recent success of its commercial business.
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For most of its existence, Palantir's main platform, Gotham, has been built mainly for government entities like the CIA, Department of Defense, and FBI. Although this has been a good business for Palantir, relying solely on government contracts could limit growth due to future budget constraints and political volatility.
With the introduction of Palantir's AI Platform (AIP) -- which is designed to use AI to automate operational processes -- it has shown that it can be successful in catering to commercial businesses. In the second quarter (Q2), Palantir's U.S. commercial business increased revenue 93% year over year to $306 million and accounted for around 30.5% of its total revenue.
Here is how much the segment made in the previous three quarters:
- Q1 2025: $255 million
- Q4 2024: $214 million
- Q3 2024: $179 milliom
- Q2 2024: $159 million
With Palantir's commercial business showing promise, its total addressable market is always widening. The stock has admittedly become very expensive with Wall Street's obsession, but its long-term growth potential just became more promising.
