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Government Contract Win

Palantir (PLTR) recently delivered its first two AI-powered systems to the U.S. Army, marking a major milestone for the company. The deployment follows Palantir’s $178 million contract win last March, establishing it as a key player in defense technology.

The contract includes 10 systems to be delivered by 2026, after which the Army will decide whether to proceed with full-scale production. The new systems are designed to enhance battlefield intelligence and improve targeting accuracy by processing real-time data.

This marks the first time a software company has taken the lead on a major defense hardware program, underscoring the growing role of AI in military operations.

Why Did Palantir Drop?

Palantir shares have dropped recently, partly due to a broader selloff in AI stocks following reports of potential AI spending cuts by major players like Microsoft.

Investor sentiment toward the AI sector has weakened as companies have begun to scale back aggressive spending plans, raising concerns about future growth potential. The stock has also faced pressure from announced cuts in U.S. defense spending, which could impact Palantir’s government contract revenue.

A proposed 8% reduction in the defense budget over the next five years could limit new contract opportunities and slow contract renewals. Since a significant portion of Palantir’s revenue comes from government contracts, any reduction in defense spending could weigh on the company’s growth trajectory.

CEO Alex Karp’s adjusted plan to sell company shares has added to investor uncertainty. Insider selling is often viewed as a negative signal, suggesting that management may see limited upside in the stock’s near-term performance.

Combined with broader market volatility and concerns about AI spending, downward pressure was placed on Palantir’s stock price in recent trading.

Financial Outlook

Palantir reported strong Q4 results, with revenue up 36% year-over-year, driven by growth in both government and commercial segments. Earnings also beat expectations, increasing 75% to $0.14 per share. The company secured 129 contracts worth at least $1 million in Q4 and generated $1.2 billion in operating cash flow last year.

This consistent growth highlights strong demand for Palantir’s AI and data solutions across multiple industries.

Is Palantir a Buy?

Palantir remains a high-risk, high-reward investment. The company has demonstrated strong revenue growth, consistent earnings beats, and expanding contract wins in both the government and commercial sectors.

Its AI Platform (AIP) continues to drive operational efficiency and customer adoption, positioning Palantir as a leader in AI-driven automation and data analytics.

However, Palantir’s recent high valuation remains a concern. The stock has been seen trading with elevated price-to-earnings and price-to-sales ratios compared to industry averages, which could limit future upside unless the company sustains rapid growth. The heavy reliance on government contracts may also add an element of risk, particularly if defense spending continues to decline.

Despite its strong performance, Palantir’s valuation remains high compared to industry averages, which may deter some value investors. Most analysts have rated the stock a “Hold,” with an average price target suggesting modest upside.

For long-term investors with a higher risk tolerance, Palantir’s focus on AI-driven defense and commercial solutions could provide substantial growth potential. 

Technical Analysis

Palantir has moved down approximately 31.81% from its all-time high, and the stock was recently seen trading at a key, psychological level. The stock's RSI reading appears to be neutral, while overall market sentiment has remained neutral as well.

If shares were to drop below that psychological level in the coming days, the stock could see continued downside pressure. For those considering adding Palantir to their portfolio, potential buy limit ideas are included below: 

• $73.41
• $61.37
• $44.07

Remember: Investing is personal, and what is right for me might not be right for you. Always do your own due diligence. You should only invest based on your own risk tolerance and your timeframe for reaching your portfolio goals.

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Summary

Palantir’s delivery of AI-powered systems under its $178 million contract with the U.S. Army highlights a major advancement in defense technology.

Despite strong financial performance and steady growth in government and commercial contracts, the stock has faced pressure from broader AI market weakness, defense spending cuts, and insider selling. 

While Palantir’s valuation has remained high, its focus on AI-driven automation and expanding government partnerships could support future growth. For investors willing to take on higher risk, this could present an opportunity for long-term reward.

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