Once again, Palantir Technologies (PLTR -1.14%) is easily outpacing the S&P 500 this year. As of mid-2025, the stock has more than doubled, making it the best-performing stock in the index. Even more impressive is that it was also the best-performing stock in the S&P 500 last year, when it was up a whopping 340%.

So, what's driving Palantir's remarkable performance? Simply put, the company is firing on all cylinders. It's seeing accelerating revenue growth, strong momentum in both the U.S. commercial and government sectors, and the opportunity still in front of it is just massive.

What makes Palantir special?

Palantir isn't just another artificial intelligence (AI) company. While many tech companies are busy developing AI models, Palantir is focused on helping organizations use AI to make actionable decisions.

Palantir's platform doesn't just gather data and analyze it -- it's able to capture data from a wide array of sources and then organize it into an ontology that it then links to real-world assets and processes. This essentially turns its Artificial Intelligence Platform (AIP) into an AI operating system that allows its customers to apply AI to solve real-world problems.

Accelerating revenue growth

One of the biggest reasons behind the stock's massive gains, both this year and last, is that Palantir's accelerating revenue. In Q1, the company's revenue jumped 39% year over year to $884 million. It was the seventh consecutive quarter that the company's revenue growth increased.

Data source: Palantir quarterly reports.

Palantir's strong revenue growth is driven by the U.S. commercial sector. For years, the company's main source of revenue has been from government contracts, and the U.S. government is still its largest customer by far. However, what's really caught investors' attention is the company's massive growth in commercial clients.

U.S. commercial customers are embracing Palantir's AIP, and demand is only picking up. In Q1, its U.S. commercial revenue soared by 71%, but even more important was that its commercial remaining deal value -- which refers to revenue it will recognize in the future from contracts already signed -- surged by 127%.

Palantir's government business also isn't slowing down. Its U.S. government revenue rose 45% last quarter as the federal government begins to embrace AI.

The company continues to have a strong relationship with the U.S. Department of Defense (DoD) and is constantly signing large multiyear contracts. Separately, it also recently signed a large deal with NATO for its Maven Smart System. International defense could be yet another area of growth for the company in the coming years.

Massive potential of Palantir's AI platform

What really gets investors excited, though, is Palantir's potential. Its platform is already used across a wide range of sectors, including defense, healthcare, finance, telecom, and energy. Just the breadth of use cases its platform is being used for is remarkable. It's being used for everything from helping monitor sepsis at hospitals to managing energy infrastructure to optimizing supply chains for food companies.

If Palantir can continue expanding its footprint into more industries and countries, its growth potential is limitless. Notably, the company's platform hasn't really even been embraced by European companies, which opens another big area of growth down the line. It also recently introduced AI agents to its platform. This could be another big step forward, making its platform even more action-driven.

Image source: Getty Images

Is Palantir's stock still a buy?

Not surprisingly, being the top performer in the S&P in both 2024 and so far in 2025 led the stock to carry a pretty hefty valuation. Its price-to-earnings ratio is now 665, with its forward P/E at 270 and its price-to-sales ratio at 122. While Palantir's stock isn't cheap, its growth story is compelling. The opportunity in front of it is just massive, given the breadth of industries and use cases its AI platform can be used for.

Great companies are rarely cheap, and if Palantir can become the operating system of AI, the stock is still going to have plenty of upside from here over the long term.