Palantir's U.S. commercial revenue soared 137% from a year before, a development that CEO Alex Karp pointed to as evidence of the company's AI momentum.

Palantir Technologies reported a record-breaking quarter on Monday, beating revenue and earnings expectations.

Palantir stock rose 7% in after-hours trading and extended rally to 10.7% in overnight trading.

Palantir (PLTR) announced $1.41 billion of revenue for the fourth quarter of 2025, a 70% rise relative to a year before. The result topped the FactSet consensus of $1.34 billion and marked the company's highest quarterly revenue to date.

The growth was driven by a massive breakout in the U.S. commercial sector, which grew 137% year over year to $507 million. U.S. government revenue grew 66% year over year to $570 million, with the most significant development of the quarter being Palantir's Navy contract for ShipOS software. On the earnings call, CFO David Glazer attributed the accelerating demand to Palantir's Artificial Intelligence Platform, which connects large language models to a company's private data and operations.

Palantir closed a record $4.26 billion in total contract value for the quarter. The company also saw deepening engagement from its largest clients, with trailing 12-month revenue from its top 20 customers rising 45% to $94 million per customer, management said on the call.

"Palantir's Rule of 40 score is now an incredible 127%," CEO Alex Karp said in the company's press release, meaning that the sum of the company's annual revenue growth rate and adjusted operating margin hit 127%.

Karp attributed the success to the company's early bet on artificial intelligence, allowing Palantir to deliver scalable results from AI technology while competitors scramble to catch up.

"The non-adopters, the have-nots, are hoping for a catch-up function," Karp said on the earnings call. However, competitors investing in undifferentiated large language models are ruining the economics of their business, he said. "If you're making revenue with no way of making profit, because the cost of it is so high, that's not valuable," Karp said.

The company also posted a new record of $609 million in net income for the fourth quarter, a 28% increase from the previous quarter. Adjusted earnings for the quarter came out to 25 cents per share. Wall Street analysts had been anticipating 23 cents per share.

The company forecasts fiscal 2026 revenue of $7.18 billion to $7.20 billion, representing 61% growth and coming in well above the $6.3 billion analyst midpoint.

For the current quarter, Palantir expects revenue between $1.53 billion and $1.54 billion, also beating consensus expectations of $1.45 billion.

The market's positive reaction marks a sharp reversal of a recent trend. Shares of Palantir have fallen nearly 30% in the past three months, battered by valuation concerns and broader fears that AI could disrupt traditional software models.

Karp pointed to Palantir's December-quarter outperformance as proof that AI can actually add value to businesses instead of just contributing to stock-market hype. "Other pockets of what some not-incorrectly describe as a frothy market for artificial intelligence may feel pressure to manage their businesses around their financials," Karp wrote in a letter to shareholders. "Our record profit, however, is pure and uncontrived."

On the call, he seemed to reference the criticism of circular financing in AI and the idea that some companies may be investing in their customers for the purpose of artificially boosting their sales. "These relationships are not circular-pay relationships in any way," Karp said. "We're going to deliver and then we get paid, and we got paid last year a lot."