For most of its life, Palantir Technologies (PLTR -2.99%) has been a government software company.
Even now, with shares near $186 as of this writing, the artificial intelligence (AI) software specialist’s biggest business at home is still the one built on government contracts. U.S. government revenue was $809 million in the second quarter, against $764 million for U.S. commercial.
But the gap is down to $45 million, and the two lines are not growing at the same speed. Last quarter, the U.S. commercial side grew 149% year over year. The government side grew 90%.
Roll those curves forward and they cross almost immediately. My prediction: U.S. commercial revenue passes U.S. government revenue in the third quarter of 2026 (the quarter that ends this month), and well before 2027 even if the timing slips.
That crossover would be more than a milestone, because when the faster-growing business becomes the bigger one, the whole company’s growth rate starts bending toward it.
Image source: Getty Images.
Two lines, $45 million apart
The second quarter is the closest the race has been all year. U.S. commercial revenue reached $764 million, up 149% year over year and 28% from the first quarter. U.S. government revenue reached $809 million, up 90% year over year and 18% sequentially.
Both rates are extraordinary at this scale. The government side’s 90% alone would be a standout result for most software companies. The commercial side has simply been faster, and consistently so. In the first quarter, the same race ran 133% against 84%.
Notably, though, the quarter-to-quarter race is tighter. In the first quarter, the government business grew faster sequentially, 21% versus 18%. That flip came from a customer program moving out of the commercial segment and into the government one. Management said commercial growth would have reached 143% year over year without the transition.
Still, the year-over-year gap is the durable pattern — 49 percentage points in the first quarter, 59 in the second.
Management credits the surge to demand for what CEO Alex Karp calls “AI sovereignty,” meaning customers want control over their own operations, data, and decisions.
When do the lines cross?
Take the second quarter’s sequential rates and roll them one quarter forward. Commercial revenue growing 28% from $764 million lands at about $980 million. Government revenue growing 18% from $809 million lands at about $955 million. On that math, the lines cross in the third quarter, the period ending Sept. 30.
And the bar, I think, is lower than it sounds. After all, closing a $45 million gap from a $764 million base only takes a sequential growth edge of about 7 percentage points. The commercial side’s edge in the second quarter was 10 points.
Management’s own numbers lean the same way. Palantir raised its full-year U.S. commercial revenue guidance to more than $3.424 billion, which implies growth of at least 134%. It raised its adjusted free cash flow outlook, too, to between $4.5 billion and $4.7 billion for the year.
Could the timing slip a quarter? Of course. One large government deal landing in September may hold the old order for another period.
But for the crossover to miss 2026 entirely, commercial’s sequential growth would need to slow to about 21% for two straight quarters while government held its 18% pace. And a slowdown that sustained seems unlikely: U.S. commercial remaining deal value (the value left on signed contracts, assuming customers exercise every option and cancel none) climbed 124% year over year to $6.2 billion.
A bigger commercial business lifts the whole growth rate
The order of the two revenue lines matters because the company’s blended growth rate is a weighted average, and the weights are about to flip.
Today, the slower-growing government business carries more weight in U.S. revenue. Once commercial is the bigger line, its 149% growth counts for more than the government side’s 90%, and the blended rate drifts higher before anyone signs an extra contract.
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To be fair, U.S. revenue growth accelerated from 104% in the first quarter to 115% in the second, but that was mostly both segments speeding up. The shifting weights added only a fraction of a point. That contribution grows as commercial’s share of the revenue base rises.
A majority-commercial Palantir would also get judged the way a commercial growth stock is judged — on the size of its market, not on federal budget cycles.
Investors won’t have to wait long to see whether my prediction is right. Palantir’s third-quarter report, likely in early November, will print both numbers. If commercial lands on top, the crossover arrives with a quarter to spare.
If the sequential steps flip again the way they did in the first quarter, the date may slide one period out. But with commercial growing 59 points faster year over year, I don’t see it slipping past 2026.
