By Arsheeya Bajwa

(Reuters) - Data analytics firm Palantir Technologies raised its annual revenue forecast on Monday, riding on strong demand for its services that help businesses deploy artificial intelligence applications.

However, its shares fell more than 7% in after-hours trading as the raised revenue forecast was below analysts' expectations.

The company, co-founded by billionaire Peter Thiel, raised the mid-point of its expectations for annual revenue to $2.68 billion, which fell short of an average estimate of 17 analysts of $2.71 billion, according to LSEG data.

"(The share reaction was) probably a result of investors expecting a far greater beat and raise versus what Palantir delivered," said Morningstar analyst Malik Ahmed Khan.

Palantir has benefited from the generative AI boom thanks to its artificial intelligence platform (AIP), which, among other uses, tests and debugs code and helps evaluate AI-related scenarios.

"AIP is driving a huge part of both our new customers and growth within existing customers, and it's having a huge impact on our business," chief revenue officer Ryan Taylor told Reuters.

Taylor said businesses were signing "seven-figure deals shortly" after completing its AI boot camps, which give potential clients access to its platform for up to five days and have been credited with driving rapid customer additions.

Palantir reported first-quarter revenue of $634.3 million which beat analyst expectations and its largest quarterly profit, according to a CEO letter.

Much of the focus has been on the company's attempts to diversify its revenue to reduce its reliance on government spending. Palantir works closely with governments, providing software for visualizing army positions, among other things.

Revenue growth in the U.S. commercial business, which accounts for sales to businesses in the country, slowed to 40% year-over-year in the first quarter, compared to 70% in the prior quarter.

This deceleration was never going to be received well, said RBC Capital Markets analyst Rishi Jaluria.

The Denver, Colarado-based company, however, raised its 2024 U.S. commercial revenue forecast to above $661 million from its earlier expectations of about $640 million.

(This story has been corrected to fix the number of analysts polled to 17, not 4, in paragraph 3)

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Tasim Zahid)