Palantir Technologies' (PLTR) Q1 results were "equally impressive" as its Q4 performance, driven by strong growth in US commercial and government segments, Morgan Stanley said in a note Tuesday.

The results were seen as particularly strong given broader economic uncertainty and prior concerns about whether large government and commercial deals would close.

Total revenue rose 39% year-over-year to $883.9 million, marking the company's seventh straight quarter of accelerating growth. US commercial revenue climbed 70% from a year earlier and 19% sequentially to $255 million, driven by momentum around the company's artificial intelligence platform offering.

Government strength was also notable, with international government revenue accelerating to 46% growth, helped by expanded partnerships with the UK's NHS and NATO. However, the international commercial segment remained a weak spot, declining 5% year-over-year after showing 3% growth in Q4, according to the note.

The firm highlighted margin outperformance, with adjusted operating margin at 44%, 200 basis points ahead of consensus. Free cash flow also exceeded expectations at $370 million, after adjusting for $66 million in payroll taxes related to stock-based compensation.

Despite Palantir's continued momentum and status as a top AI beneficiary in software, Morgan Stanley maintained an equal-weight rating and raised its price target on the company to $98 from $90.

Shares of Palantir Technologies were down nearly 12% in recent trading.

Price: 108.99, Change: -14.78, Percent Change: -11.94