1 Reason Wall Street Is Obsessed With Palantir Stock

Key Points

• Palantir has expanded its business beyond just catering to government entities.

• The company's commercial business grew revenue by 93% year over year in the second quarter.

• A recent stock price surge has made Palantir's stock expensive by virtually all metrics.

• 10 stocks we like better than Palantir Technologies ›

When you think of stocks that have had immense success over the past year, it's hard not to think of software company Palantir Technologies (NASDAQ: PLTR). In that time, its stock is up around 400%, far more than the S&P 500 (SNPINDEX: ^GSPC), which is up around 14%, or any other S&P 500 stock in that span.

Like many other stocks, Palantir has been a huge beneficiary of recent artificial intelligence (AI) hype, but there seems to be a specific reason Wall Street has increasingly become obsessed with the stock: the recent success of its commercial business.

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Image source: Getty Images.

For most of its existence, Palantir's main platform, Gotham, has been built mainly for government entities like the CIA, Department of Defense, and FBI. Although this has been a good business for Palantir, relying solely on government contracts could limit growth due to future budget constraints and political volatility.

With the introduction of Palantir's AI Platform (AIP) -- which is designed to use AI to automate operational processes -- it has shown that it can be successful in catering to commercial businesses. In the second quarter (Q2), Palantir's U.S. commercial business increased revenue 93% year over year to $306 million and accounted for around 30.5% of its total revenue.

Here is how much the segment made in the previous three quarters:

• Q1 2025: $255 million
• Q4 2024: $214 million
• Q3 2024: $179 milliom
• Q2 2024: $159 million

With Palantir's commercial business showing promise, its total addressable market is always widening. The stock has admittedly become very expensive with Wall Street's obsession, but its long-term growth potential just became more promising.

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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.