Palantir’s revenue surged in its most recent quarter as the company said businesses are increasingly turning away from artificial-intelligence labs and seeking to more fully control their use of the technology.

The company, which makes bespoke data management and analysis software for businesses and governments, on Monday reported 96% revenue growth to $2.31 billion, beating Wall Street’s expectation for $2.18 billion.

The growth was headlined by Palantir’s U.S. commercial business, where revenue surged 148% to $984 million. Revenue from the U.S. government was $953 million, up 96%. The company said this was the first time its commercial revenue had surpassed government revenue in the U.S.

“This is not mere growth,” Chief Executive Alex Karp wrote in a letter to shareholders. “It is a rate of expansion that represents a degree of intensity and sustained momentum that we believe is unmatched in recent economic history.”Palantir stock dropped more than 3% in after-hours trading, reflecting some anxiety among investors over the company’s ability to sustain its growth and justify its more-than $400 billion valuation.

The company said it closed 212 deals in the third quarter, worth $2.9 billion. That’s a slowdown from the prior period, which brought in 220 deals worth $3.4 billion.

The company posted a third-quarter profit of $1.13 billion, or 44 cents a share. That compares with a profit of $475.6 million, or 18 cents a share, a year earlier.

On an adjusted basis, earnings were 44 cents a share, beating Wall Street’s expectation for 41 cents a share, according to analysts polled by FactSet.

Palantir also lifted its full-year guidance, projecting revenue of $8.53 billion to $8.534 billion, up from earlier guidance of $8.15 billion and $8.158 billion. Analysts were expecting $8.21 billion in full-year revenue heading into the print.

That projection includes at least 143% growth in U.S. commercial revenue this year to more than $3.6 billion. Palantir previously guided for the U.S. commercial business to grow at least 134%.

For the current fourth quarter, the company expects to bring in $2.649 billion to $2.653 billion of revenue. Analysts expect $2.46 billion in fourth-quarter revenue. Shares were up 0.9% at $180.00 in after-hours trading.

Palantir’s earnings come on the heels of a bruising week for technology stocks and a broad selloff across the sector, but analyst expectations remained high for the data-analytics company to continue posting strong growth in revenue and profit.

Florida-based Palantir’s revenue and stock price have soared as the company has benefited from more government contracts under the second Trump administration, emerging as a power player in defense. Palantir technology underpins key military programs including the Army’s new command-and-control system and the Pentagon’s AI targeting system, Maven Smart System, which had roles in the raid that led to the arrest of former Venezuelan President Nicolás Maduro and the Iran war.

The U.S. Marine Corps recently said that it has expanded access to Maven across its units, another indication of how deeply embedded Palantir has become in the military.

After a period of losing steam in its government work, Palantir’s revenue growth has accelerated every quarter since mid-2023, almost doubling in the latest quarter from the prior year. Even so, analysts have long said its market capitalization is far too high.

The growth of AI, however, poses a threat to Palantir, analysts, employees and industry executives have said. Some AI models can similarly ingest disparate data sets, draw conclusions and assist with decisions, and at a fraction of the cost.

“The main risk for Palantir is increasing competition from the LLMs,” analyst Louie DiPalma said in a research note last week. He said the model companies are hiring from Palantir.

Palantir’s Karp has frequently publicly derided the AI labs for using the proprietary data of companies to train their models. Palantir has sought to capture potential commercial customers that are wary of sharing their data with the labs.

“We have no interest in building software that leeches the value and alpha -migrating what they own and have built and have earned to our systems and our accounts,” Karp wrote in the Monday letter.

In September, Palantir disclosed a deal combining its software with Nvidia open-weight models in an AI offering that, it said, lets users retain control of their own data.

Palantir faces a backlash of its own in connection with its data-management practices in the United Kingdom, where pressure is mounting on members of Parliament to end a contract with the company to manage its public health data. Critics point to the cost of Palantir, concerns about how patient data is accessed, and its work with the U.S. military and immigration enforcement.

“It will be hard to see meaningful expansion abroad without major shifts in European politics,” said Ryan Lee, an executive at financial firm Direxion, which offers exchange-traded funds.