Palantir Scores First $1 Billion Contract; Is It Priced In?

Key Points

• Palantir lands its first $1B U.S. Army contract, boosting its role in AI-driven defense systems.
• PLTR stock is up 67% YTD despite a lofty valuation.
• Growth in government and commercial deals fuels bullish momentum; however, traders may be hedging against downside risk.

Palantir Technologies Inc. NASDAQ: PLTR continues to stack up wins. One of the company’s latest announcements was a $795 million contract with the U.S. Army regarding its Maven Smart System. The significance of this contract is that it’s an extension to Palantir’s prior $480 million contracts signed in 2024. That means that Palantir has its first $1 billion contract.

Since going public via a direct listing in 2020, Palantir has had more than its share of naysayers. However, this contract is just the latest example of how the company has managed to check the boxes that, for now, have propelled the stock higher despite a lofty valuation.

As the market opened on May 27, PLTR stock is more than 10% below its all-time high (ATH) of May 15, 2025. But the stock is still up 12.15% for the month, 67.2% in 2025, and over 500% in the last 12 months.

Bearish investors will say that, putting the deals aside, a stock is different than a company. Their argument would be that the billion-dollar deal doesn’t change the fact that Palantir stock is still expensive based on traditional metrics.

It’s trading at a forward price-to-earnings (P/E) ratio of over 397x and a price-to-sales (P/S) ratio of over 92x.

Government Demand Is Expected to Grow

The significance of the Maven Smart System contract is hard to overstate. This is a Department of Defense (DoD) initiative that highlights the Pentagon’s focus on using artificial intelligence (AI) tools for data fusion and target identification.

On a broader scale, investors could see this as the start of Palantir's development of an operating system for the DoD. Naysayers have been putting pressure on the stock, believing that Palantir will have contracts cut as part of the U.S. government’s move towards efficiency.

Those concerns appear to be shortsighted. In fact, recent statements from the DOD suggest that they foresee more use for Palantir technologies. That aligns with the Pentagon’s increased budget for software licenses.

Palantir is also well-positioned for the Golden Dome initiative that the Trump administration is trying to push through Congress.

The Commercial Side Just Got a Lift as Well

Government contracts account for about 55% of Palantir’s revenue. However, the commercial side has been growing strongly in recent years. The latest example of this growth is the contract that Palantir signed with Bain & Company. Bain is an American management consulting company that “helps the world’s most ambitious change makers define the future.”

The deal's financial terms were not available at the time of this writing. However, the partnership will pair Palantir’s AI operating systems with Bain’s deep industry expertise across multiple sectors.

Momentum Traders Continue to Chase Performance

Long-term investors may find it easier to filter out the noise surrounding Palantir and may be willing to accept a higher valuation. But what about traders? The bullish argument, for now, is that momentum traders are chasing performance. That leads them to a narrow group of technology stocks, including Palantir.

The options chain for Palantir for August 15, 2025 (about 10 days after Palantir’s next earnings report) shows many call options with a strike price of $150. That’s not only about an 18% gain from the May 27 price, but also over 15% above the ATH.

However, there are even more put options with a strike price of $115, which would decline about 9%. That could mean that traders are hedging against downside risk. Short interest, while still a small 3.3% of the float, has been on the rise.

Short sellers have been burned by Palantir earnings in the past. However, they may feel more emboldened as the floor on PLTR stock continues to climb.