Palantir shares jump after government contracts lift quarterly sales
Palantir reported government revenue up 66% in Q4, lifting total sales above estimates and sending shares higher amid renewed investor interest in its defence-focused AI tools.
Copy link
By Torontoer Staff
Palantir Technologies shares climbed 11.5 percent in premarket trading after the company posted quarterly revenue that beat Wall Street expectations, driven by a sharp increase in U.S. government business. The Denver-based data analytics firm said government-derived revenue rose 66 percent in the fourth quarter to US$570 million, helping lift total sales to US$1.41 billion.
Management flagged first-quarter revenue above estimates and projected a steep sales increase in 2026, citing new and expanded government contracts and rising U.S. defence spending as key drivers. Investors reacted to the message, betting on Palantir’s military-grade artificial intelligence tools and services.
Quarterly results and what drove them
Palantir said revenue from the U.S. government climbed to US$570 million in Q4, up 66 percent year over year. That helped total revenue reach US$1.41 billion, above consensus estimates of about US$1.33 billion. The company cited wins across federal agencies and larger, multi-year deployments as reasons for the acceleration.
Founded with early support from the CIA and co-founded by Peter Thiel, Palantir has built a reputation supplying data integration and analytics platforms to complex government operations. Management pointed to stronger budgetary support for reindustrialization and supply-chain resilience as creating more opportunities for its software.
Market response and valuation concerns
Palantir’s stock has been one of the strongest AI plays over the past three years, rising roughly 1,700 percent since early 2023. Despite that long run, the shares have declined about 17 percent so far this year as investors weigh the company’s high valuation. Palantir trades at a forward price-to-earnings ratio above 130, a level analysts say will require sustained growth to justify.
Analysts at Jefferies noted the firm faces tougher year-over-year comparisons as revenue scales, writing that Palantir will need to maintain strong performance to justify current pricing. Morningstar analysts were more upbeat, saying political support for rebuilding American industry and supply chains creates fertile conditions for deployments of Palantir’s software.
We believe that the growing political tailwinds for reindustrialization and the strengthening of American supply chains provide a fertile backdrop for greenfield deployments of Palantir’s efficiency-driving software.
Morningstar analysts
Contracts, controversy and regulatory risk
A significant portion of Palantir’s recent growth comes from federal contracts, including a high-profile award from U.S. Immigration and Customs Enforcement to develop surveillance software. The ICE contract, awarded last year, was the company’s largest single award from that agency as of June 3 among 46 federal contract actions since 2011.
Those ties have drawn scrutiny as debates over immigration enforcement intensified following fatal shootings in January. Palantir’s CEO Alex Karp defended the company’s work with government clients, saying the firm has safeguards in place to prevent overreach and that it plays a critical role in complex government operations.
We are supporting in a critical manner, some of the most interesting, intricate, unusual operations that the U.S. government has been involved in.
Alex Karp, CEO
What to watch next
- First-quarter revenue and whether management’s guidance continues to exceed estimates.
- Progress on the contracts that management cited for a projected 2026 sales surge.
- Regulatory and reputational risks tied to government surveillance work, especially with agencies like ICE.
- Valuation metrics, including forward P/E and margin trends, to see if profitability keeps pace with revenue growth.
- Customer concentration and the mix between commercial and government revenue.
For investors, the appeal is clear: recurring, high-value government contracts can underpin durable revenue streams. The trade-off is elevated scrutiny and a stretched valuation that leaves little room for missteps. Palantir’s next quarterly updates and details on contract rollouts will be critical to whether the company can sustain its recent momentum.
PalantirAIstocksgovernment contractstechnology
