Palantir surges as government contracts boost quarterly sales

By Kanishka Ajmera and Rashika Singh

Feb 3 (Reuters) - Shares of Palantir Technologies PLTR.O jumped 11.5% in premarket trading on Tuesday as investors bet on the company's military-grade artificial intelligence tools and services after it posted a surge in quarterly sales, helped by rising U.S. defense spending.

Denver-based Palantir's shares have risen 1,700% over the past three years, making it one of the best-performing AI stocks.

The company, founded by tech billionaire Peter Thiel, with the CIA as one of its early backers, said on Monday that revenue derived from the U.S. government jumped 66% in the fourth quarter to $570 million, helping lift total sales to $1.41 billion, above analysts' estimates of $1.33 billion.

The data analytics firm forecast first-quarter sales above estimates and flagged a sharp surge in sales in 2026, driven in part by government contracts.

"We believe that the growing political tailwinds for reindustrialization and the strengthening of American supply chains provide a fertile backdrop for greenfield deployments of Palantir’s efficiency-driving software," Morningstar analysts said.

Palantir's shares have fallen nearly 17% this year, as investors remain wary of the company's high valuation including a forward price-to-earnings ratio of 130.77.

The company will need to maintain its impressive performance to justify its current pricing, especially as future growth comparisons become more challenging, analysts at Jefferies said.

PALANTIR DEFENDS SURVEILLANCE TECH AMID ICE PROTESTS

CEO Alex Karp defended its surveillance technology, emphasizing it has safeguards to prevent government overreach.

He said the company was "supporting in a critical manner, some of the most interesting, intricate, unusual operations that the U.S. government has been involved in", but did not specify which government programs Palantir was involved in.

Karp's statement comes amid increased scrutiny on companies associated with U.S. Immigration and Customs Enforcement (ICE) as Americans have retaliated against ICE's aggressive immigration enforcement tactics following the fatal shootings of two U.S. citizens in separate incidents in January.

Last year, Palantir landed a contract with ICE to develop surveillance software for immigration enforcement, which as of June 3, was its largest single award from the agency among 46 federal contract actions since 2011.