Is Palantir’s Growth Too Dependent on Government Contracts?

Palantir Technologies (NYSE: PLTR), which is deeply involved with analytics and artificial intelligence (AI), has been growing both its commercial and government operations over the years.

However, some investors are concerned that perhaps it is too dependent on the government for its growth. A change in administration could bring different policies, and that could impact contract renewals. At the same time, however, government customers can be a great source of consistent and recurring revenue.

Below, I’ll look at how much of Palantir’s revenue has come from government versus commercial customers and what’s been driving its growth.

The revenue mix has been shifting — slightly

In Palantir’s most recent quarterly results, the company’s government revenue totaled a little under $308 million, which was 23% more than the $251 million in revenue its commercial clients brought in.

Two years ago, the revenue was slightly more tilted, with government revenue of $218 million being 25% higher than the $174 million the company reported on the commercial side. While technically, Palantir has become less dependent on government revenue since then, there hasn’t been a huge change.

Why the mix could change in the future

Now that AI has become more mainstream and businesses are looking to do more with data, Palantir has been experiencing a significant uptick in demand. And last quarter, it experienced a notable jump in commercial revenue.

There has been a fair bit of volatility in quarter-over-quarter revenue growth. But consider that ChatGPT launched in November 2022. That’s when the AI hype really started to take off. If you just look at the last three quarters, since the start of 2023, it’s clear that the commercial business has been doing much better, with at least 8% quarter-over-quarter revenue growth in two of the past three quarters.

With the company…