(Reuters) -Data and analytics firm Palantir Technologies ( PLTR ) raised its annual sales forecast on Monday, betting on strong demand for its products that help businesses adopt generative AI technology.

Still, shares of the company fell more than 2% in extended trading.

Palantir ( PLTR ) has benefited from a boom in the adoption of GenAI technology as enterprises leverage the company's expertise in managing and analyzing data to help train and run new AI apps using its platform.

The Denver, Colorado-based company now expects revenue in fiscal year 2025 between $3.89 billion and $3.90 billion, up from its earlier forecast of sales between $3.74 billion and $3.76 billion. Analysts on average expect $3.75 billion in annual sales, according to data from LSEG.

Palantir's ( PLTR ) shares are up more than 60% this year, widely outperforming the benchmark S&P 500 Index, which is down more than 3%, as investors expect the company to benefit from AI deployment and government spending on defense-related tech even as global markets falter because of trade-related uncertainties.

Co-founded by tech billionaire Peter Thiel, Palantir ( PLTR ) has been increasingly diversifying into commercial applications as it works to reduce its dependence on government spending.

Palantir ( PLTR ) now expects U.S. businesses to drive more than $1.18 billion in sales this year, up from its earlier expectation of more than $1.08 billion. It also forecast second-quarter revenue above estimates.

Still, a significant portion of Palantir's ( PLTR ) sales is led by its services for governments, such as supplying software that visualizes the position of troops in a battle. The company's early financial backers included the CIA's venture arm, In-Q-Tel.

The U.S. government represented more than 42% of revenue in the three months ended March 31. Total sales of $883.9 million during that period beat estimates of $862.8 million.

Big U.S. government contractors such as Accenture and IBM have flagged a hit to their businesses from cost-cutting efforts by President Donald Trump's administration mostly through the Department of Government Efficiency.

During an interview with Reuters, Palantir's ( PLTR ) executives did not directly address questions on whether DOGE spending cuts, spearheaded by billionaire Elon Musk, would impact the company's contracts.

"Focus on efficiency is excellent for Palantir ( PLTR ). We very much support a push by the U.S. government to push on efficiency across the government," finance chief David Glazer told Reuters.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Anil D'Silva)