Palantir stock is down despite yet another move into government contracts

Palantir Technologies stock (PLTR) reversed Friday's gains driven by the company's strategic partnership announcement. The stock is down 5.6% in early Monday trading.

Palantir soared last week thanks in part to a partnership with Booz Allen Hamilton—yet another push into the public sector.

Although the details were sparse, both companies will likely co-bid on government contracts focused on improving “data-centric systems” in the defense industry.

Both companies rely heavily on government contracts for the majority of their revenue. For Booz Allen, government contracts account for up to 98% of company-wide revenue, versus 60% for Palantir.

Some of Palantir’s largest government contracts include a $99.8 million project to implement its Maven Smart System technology across all military branches.

The technology is named after the Pentagon’s Project Maven, which uses AI and machine learning to detect military targets.

Palantir also secured a $99.2 million R&D contract with the U.S. Army around user-centered machine learning or UCML.

A steady stream of government contracts means Palantir operates in a virtually “recession-proof” industry because Uncle Sam never skims on defense.

This has allowed the company to improve its cash position and profitability.

Palantir earnings, revenue outlook remain strong

Palantir is on track to close out a solid fiscal 2024 “driven by unrelenting AI demand that won’t slow down,” said co-founder and CEO Alex Karp.

According to Karp, Palantir’s rapid growth is due to the speed at which U.S. institutions “have adopted our platforms and artificial intelligence capabilities more broadly.”

In the third quarter, Palantir reported a 30% increase in revenue as net income more than doubled to $143.5 million. Revenues and earnings were both higher than Wall Street’s estimates.

The company upgraded its outlook, calling for fourth-quarter revenue of between $767 million to $771 million. Full-year revenue was also raised to a target range of $2.805 billion and $2.809 billion.

According to CFO David Glazer, Palantir expects to earn between $1.054 billion and $1.0858 billion in adjusted income for the year.

Palantir’s quarterly earnings, market cap growth, and shareholder structure have catapulted PLTR stock into the S&P 500. S&P Global announced Palantir’s entry into the famed index in September.

Since joining the S&P 500, Palantir’s market cap has continued to grow. The company is now more than four times more valuable than the average S&P 500-listed company by market cap.