MW Palantir's stock could rise from this 'underpenetrated' sector core to its DNA
By William Gavin
The company could benefit from rising government spending on software, according to Oppenheimer
Palantir has become a major U.S. government contractor, with contracts from several agencies.
Palantir Technologies may have made a name for itself as a government contractor, but there's still room for it to grow its presence in that sector, according to a newly bullish analyst.
"With government spending on software/services projected to grow from$490B in 2025 to $666B by 2029 (8% CAGR), it remains an under-penetrated opportunity for the company," Oppenheimer's Param Singh said in a note to clients.
Singh on Thursday initiated coverage of Palantir (PLTR) with an outperform rating and a $200-per-share price target. Although Palantir has been criticized by some investors for its high valuation, Singh said it's "justified" because of Palantir's importance to both commercial and government customers.
That valuation, while still high at a price-to-earnings ratio of 219, has fallen in recent months amid selling off in the software sector. That's partially due to investors' concern that new artificial-intelligence tools may disrupt software business models. Palantir stock has dropped 22% year-to-date.
Palantir was founded more than two decades ago to support U.S. intelligence agencies, according to the company. As part of that mission, it's become a major government contractor, providing software for both the U.S. and its allies.
Palantir's revenue from government customers grew 53% year-over-year to $2.4 billion in 2025, nearly 80% of which was linked to U.S. government spending. Commercial revenue grew even faster, at a 60% increase compared with 2024, with U.S. sales accounting for 70% of the almost $2.1 billion total.
"The strength of our U.S. government results reflects a fundamental reality," Palantir Chief Revenue Officer Ryan Taylor told investors in February. "In an era of intensifying global threats and budgetary pressure, the government is turning to software that actually works as speed, precision and decision advantage are paramount."
Oppenheimer expects Palantir to grow government revenue at a compound annual growth rate of about 36% to $6.1 billion by the end of 2029. At that pace, Singh said, government revenue would still make up just 1% of the "relevant" total addressable market.
So far this year, Palantir has announced new deals with Ondas $(ONDS)$ and GE Aerospace $(GE)$ to produce AI-related products for government customers. Additionally, the Pentagon is seeking approval from Congress to spend $2.3 billion on Palantir's Maven Smart System in the 2027 fiscal year.
Palantir is also one of a cohort of companies reportedly working on software for the U.S. Golden Dome, a missile-defense program expected to cost about $185 billion. The first phase of the program could be worth "many" billions of dollars to Palantir, according to analysts.
Last week, Palantir won a $300 million contract with the U.S. Agriculture Department. It's also competing to provide the Federal Aviation Administration with a new AI tool for air traffic management, according to reports.
In a note to clients on Wednesday, Wedbush analyst Daniel Ives touted the "significant momentum" for Palantir, which he said points to potentially further adoption among federal agencies. He's bullish on the company and sees the "potential" for Palantir to become a trillion-dollar company over the next few years.
Palantir is due to report first-quarter earnings next week, with Wall Street forecasting year-over-year growth across the board, according to FactSet.
-William Gavin
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(END) Dow Jones Newswires
April 30, 2026 13:36 ET (17:36 GMT)
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