Multibillion-Dollar Defense Contracts: Is Palantir Quietly Turning Into a Core "Infrastructure" Stock for U.S. Intelligence?

Palantir Technologies (NASDAQ: PLTR) is one of the most intriguing stocks in the market, and the war in Iran has shone a bigger spotlight on the company. It was co-founded by Peter Thiel and other former PayPal executives who believed they could take the company's underlying fraud technology and apply it to help fight terrorism after 9/11.

While Silicon Valley balked at the idea, it was able to get funding from In-Q-Tel, the venture capital arm of the CIA, to create a platform that could provide the government with better intelligence to prevent another attack.

This eventually led to the introduction of its Gotham Platform, which the CIA began using in 2008. At the core of its Gotham technology was the platform's ability to gather data from a wide array of previously siloed sources and put it into an ontology that could map relationships between people, places, things, and events. This helped it uncover hidden patterns and provide actionable insights. Meanwhile, the advent of artificial intelligence (AI) has made its platform even more powerful.

Today, Palantir is playing an important military intelligence role both in the Russia-Ukraine war and the U.S. conflict with Iran. More than that, though, it is becoming the core nervous system of the United States' intelligence and defense apparatus. It has signed several huge contracts with various government departments over the past few years, including a $10 billion contract with the Army for its "future software and data needs."

It also has large contracts with the Department of Defense, Immigration & Customs Enforcement, Department of Homeland Security, Internal Revenue Service, and even the Department of Transportation. These contracts position the company to see continued strong revenue growth in its core U.S. government business.

Beyond the U.S. government

However, what really sets Palantir apart from most government contractors is that the company has been able to successfully expand beyond its core government business and into the commercial sector. It was able to take some of the underlying technology from Gotham and apply it to its Foundry platform for commercial customers. Then, with the introduction of its Artificial Intelligence Platform (AIP), growth really started to take off, and its commercial business became its biggest growth driver.

Palantir has now seen its revenue growth accelerate for 10 straight quarters. Its total revenue surged 70% to $1.4 billion in the fourth quarter, while its U.S commercial revenue skyrocketed 137% to $507 million. This growth is coming from a combination of new customers and customer expansion. This could be seen in Q4, when its customer count climbed 34% while its net dollar retention was a robust 139%. Meanwhile, its U.S. commercial remaining deal value soared 145% to $4.4 billion.

The key to Palantir's commercial success is twofold. First, it has been able to position AIP as almost an AI operating system. Through its data gathering and ontology capabilities, it essentially reduces costly AI hallucinations while providing actionable insights. By making AI models more useful, it has become an integral piece of the AI landscape and can be used for a multitude of use cases across a wide range of industries.

Second, Palantir has been able to develop an incredible go-to-market strategy that greatly reduces friction and shortens sales cycles. It does this by holding AI boot camps, where it can help a potential customer solve an actual issue they are facing through the use of AIP within five days. That's a huge selling point, and one reason for its strong growth.

Image source: The Motley Fool.

Is the stock a buy?

While Palantir's stock is not cheap, trading at a forward price-to-sales multiple of 46, it has ingrained itself into both the U.S. government and commercial sectors as one of the best ways to harness the power of AI. That's powerful, and it's why I think the company will eventually grow into its current valuation and could become one of the largest companies in the world.

There will be some bumps along the way, but those will likely be the best times to buy the stock.

Geoffrey Seiler has positions in PayPal. The Motley Fool has positions in and recommends Palantir Technologies and PayPal. The Motley Fool recommends the following options: short June 2026 $50 calls on PayPal. The Motley Fool has a disclosure policy.