Palantir (PLTR) shares rose more than 20% early Tuesday after the third quarter income beat expectations thanks to better-than-anticipated US government spending on its AI technology.

Global government spending for Palantir’s products, primarily in the US, rose 40% year over year to $408 million in the third quarter, accounting for 56% of the company’s total revenue for the period. That was ahead of the $379 million expected for the segment, according to Bloomberg consensus estimates.

Palantir, which makes a range of data mining and analysis software, including its Artificial Intelligence Platform (AIP), most recently won a $100 million US military contract in September for its artificial intelligence tools that identify targets for airstrikes.

“The AI ​​revolution is underway,” Palantir’s chief revenue and legal officer Ryan Taylor said on a call with investors late Monday. “The gap between AI haves and have-nots is widening rapidly, and the whole world is watching.”

Taylor said Palantir’s US government business posted its “strongest sequential growth in 15 quarters, largely driven by 21% quarter-on-quarter growth in our DoD (Department of Defense) business.”

Meanwhile, Palantir’s revenue from commercial businesses came in below expectations, coming in at $317 million versus the $317 expected. Its corporate clients include oil and gas giant BP (BP), CBS Broadcasting and General Mills (GIS). The company said sales were affected by “a decline in revenue from a government-sponsored enterprise in the Middle East.” Palantir did not respond to a request for additional details from Yahoo Finance.

Overall, the company reported adjusted earnings per share of $0.10 for the quarter, a penny above expectations, on revenue of $725.5 million, which beat analysts’ expectations of $703.7 million. Wall Street.

Palantir shares are up more than 190% year-to-date, fueled by a broader boom in artificial intelligence and The US government’s growing interest in AI warfare technologies. The stock was added to the S&P 500 in September.

“Palantir is among a handful of infrastructure software companies that have begun to meaningfully monetize generative artificial intelligence,” wrote Deutsche Bank (DB), analyst Brad Zelnick in a note to investors on Monday.

While acknowledging Palantir’s advantages, Wall Street analysts were generally skeptical of stock growth. On average, they see the stock falling to $32.81 over the next year, according to Bloomberg data, with about half of analysts tracked by Bloomberg recommending a sell on the stock. Zelnick himself has a sell rating on the stock and sees the stock falling to $26. Shares were around $50 Tuesday morning.

RBC Capital Markets analyst Rishi Jaluria said in a note on Tuesday morning: “We continue to see unfavorable risk-reward decline, with shares trading at a premium multiple,” adding: “We remain cautious on the sustainability of U.S. trade growth “.

Palantir CEO and co-founder Alex Karp gave the proverbial middle finger to doubters in comments during the company’s earnings call.

“Most people involved in technology innovation now look to Palantir as their ally,” Karp told analysts and investors.

“And so instead of walking into every meeting saying, ‘Oh, yeah, Palantir is great, but their fearless leader is crazy and might as well go to his New Hampshire townhouse,'” whatever they said, Now it seems that yes, the products are the best and we have great products.”

Palantir, which was co-founded by conservative tech mogul Peter Thiel, has at times faced backlash for its partnerships with government agencies, including Immigration and Customs Enforcement (ICE) and the Israeli Defense Force (IDF).

Karp’s outspoken, often controversial remarks about the Middle East have drew criticismand his role of a supplier of AI warfare technology to the IDF has caused some employees to leave The company.

Karp said on Monday’s call that the company aims to “bring violence and death to our (United States’) enemies while making targeting and overall security issues better for our allies and for Americans.”

Laura Bratton is a reporter for Yahoo Finance. Follow X @LauraBratton5.

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