Palantir (PLTR) stock rose 23.5% Tuesday after its third quarter earnings surpassed expectations thanks to higher-than-anticipated spending from the US government on its AI tech.

Global government spending on Palantir’s products, primarily from the US, rose 40% from the prior year to $408 million in the third quarter, accounting for 56% of the company’s total revenue for the period. This 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 AI tools that identify targets for air strikes.

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

Taylor said Palantir’s US government business saw its “strongest sequential growth in 15 quarters driven largely by our [Department of Defense] business's 21% quarter-over-quarter growth.”

Meanwhile, Palantir's revenue from commercial enterprises fell short of expectations, hitting $317 million versus the $330 million expected. Its enterprise customers include oil and gas giant BP (BP), CBS Broadcasting, and General Mills (GIS). The company said sales were impacted by "a step down in revenue from a government-sponsored enterprise in the Middle East." Palantir did not respond to a request for further details from Yahoo Finance.

Overall, the company reported adjusted earnings per share of $0.10 for the quarter, a penny ahead of expectations, on revenue of $725.5 million, which topped the $703.7 million expected by Wall Street analysts.

Palantir shares have rallied more than 190% since the beginning of the year, fueled by a broader boom in artificial intelligence and the US government’s growing interest in AI war technologies. The stock was added to the S&P 500 in September.

"Palantir is among a handful of infrastructure software companies that have started to meaningfully monetize generative AI," wrote Deutsche Bank analyst Brad Zelnick in a note to investors Monday.

While recognizing Palantir's advantages, Wall Street analysts overall have been skeptical of the stock’s surge. On average, they see shares falling to $32.81 over the next year, according to Bloomberg data, with roughly half of analysts tracked by Bloomberg recommending selling the stock. Zelnick himself has a Sell rating on the stock and sees shares falling to $26. Shares stood at $51.15 at market close Tuesday.