Palantir’s Real Washington Risk Isn’t the Budget—It’s Oversight

Key Points

• Palantir faces potential congressional scrutiny of its defense and immigration contracts following the Democratic midterm victories.
• The proposed $1.5 trillion defense budget was already facing resistance before the election, limiting how much of the uncertainty can be attributed to the results.
• Palantir's U.S. commercial revenue exceeded its U.S. government revenue for the first time in Q3, reducing its reliance on government-driven growth.

After reaching a high of around $209 in early October, shares of Palantir Technologies NASDAQ: PLTR pulled back sharply. However, shares have recovered much of the decline that followed the company's third-quarter earnings report.

The post-earnings sell-off started due to concerns that growth could slow. However, since the U.S. midterm elections, the selling pressure has continued amid concerns about Palantir's close ties to the U.S. government, particularly the U.S. military and Immigration and Customs Enforcement (ICE).

There is a perception that new leadership in Congress may cut or delay defense spending. That would add to the slower growth story for a stock that is priced for sector-beating growth for at least the next several years.

But investing based on perception often leads to missteps. The reality is more bullish than it seems, which helps explain Palantir's rebound from its post-election lows.

Budget Cut Expectations Existed Before the Election

Concerns about a cut to the defense budget are real, but they were priced into PLTR before the election. The White House requested $1.5 trillion for defense in fiscal 2027. However, on Oct. 29, just days before the midterms, Politico reported that Pentagon officials and congressional staff were already working on a smaller plan closer to $1.1 trillion. The cause was Republican infighting that had already put even part of the $1.5 trillion total in doubt, not a Democratic wave.

Most of the money at risk sits in an add-on. The request paired a $1.15 trillion base budget with $350 billion routed through a party-line bill like the 2025 tax law. A Democratic Congress can block that route, but it is far less likely to gut the base budget. Much of the proposed additional funding targets missile defense, munitions, and ships, rather than Palantir-specific software programs.

Palantir’s own revenue mix blunts the story further. In the third quarter, U.S. commercial revenue jumped 148% to $984 million, passing U.S. government revenue of $953 million for the first time. U.S. government customers produced about 41% of total revenue, while government customers worldwide accounted for nearly half. That includes civilian agencies, not just the Pentagon. U.S. government business still grew 96%. For a stock priced like Palantir, the risk isn’t losing that revenue. It’s watching that growth rate slow.

Oversight Is the Real Concern

This is where Democrats have real leverage. Starting in January, they will chair the committees that write spending bills and run investigations. That brings subpoena power and control of hearing agendas.

The groundwork is already laid. In April, congressional Democrats asked DHS for a complete list of its Palantir contracts going back to 2020, including values and the systems each one supports. In December 2025, Sen. Elizabeth Warren and Rep. Jamie Raskin asked inspectors general to investigate contractors with ties to administration officials, naming Palantir as an example.

The ICE work, including a $30 million contract to build a deportation-tracking platform called ImmigrationOS, is the most politically charged part of the business. But that contract is small in dollar terms, so the bigger risk there may be to Palantir’s reputation, not its revenue.

The Army deal matters more. Palantir holds a 10-year enterprise agreement worth up to $10 billion. Congress cannot directly cancel the agreement, although the government can terminate contracts under certain provisions. That figure is a ceiling, not a commitment. The Army reassesses the agreement every 18 to 24 months. Because orders depend on annual funding, lawmakers can add conditions and slow new spending. Still, the deal consolidated 75 contracts into one to cut costs, which makes it hard to paint as a giveaway.

The likely outcome isn’t canceled contracts. It’s friction: more hearings, more document requests, and more cautious agency buyers. For a stock this richly valued, even modest friction can weigh on sentiment. The next real test could come in early February, when Palantir is expected to issue its 2027 guidance.

The Realities Around PLTR Are Still the Same

Palantir is a high-beta stock, which means it tends to move more sharply than the broader market. That's the cost of entry for any shareholder.

The company will continue to face concerns over its close affiliation with the U.S. government and its unapologetic defense of Western values. Some valuation-focused investors avoid PLTR due to its lofty price-to-earnings and price-to-sales metrics.

Those concerns have been the same for years. Yet PLTR has delivered substantial long-term gains, and for many retail investors, the growth isn't over yet.

Palantir has a huge target on its back, and any hint of a misstep could cause a sharp downward move. But as it showed in its Q3 earnings report in early November, Palantir has reduced its concentration risk on the U.S. government; it continues to add and retain customers and is growing its free cash flow as predicted.

Palantir has a Moderate Buy consensus rating and an average analyst price target of about $215, while Barclays raised its target to $273 from $265 after the company's earnings report.