Palantir Technologies stock increased in the pre-market trading Thursday after securing a $250 million contract with the US Defense Department to spearhead research and development in artificial intelligence (AI) and machine learning (ML) technologies.
This newly inked three-year contract underscores the company’s strengthening ties with the US government and cements its pivotal role in the fusion of AI and defense technologies.
The AI services agreement will extend Palantir’s existing efforts, which have been in progress since 2018 with the Army Research Lab. Per the official announcement, the company will engage in “research and development services” in AI and machine learning under the new contract. However, Palantir has chosen to keep the contract details under wraps.
Founded by Peter Thiel in the aftermath of the September 11, 2001, terrorist attacks in the US, Palantir Technologies Inc. (NYSE: PLTR) initially faced an uphill battle in marketing its software and services to government entities. The company even sued the US Army to compel government adoption of its offerings. Palantir has since emerged as one of the select few Silicon Valley startups fostering close relationships with the Defense Department.
Louie DiPalma, an analyst at William Blair, said in a research note that the financial impact of this latest contract on Palantir is expected to be relatively modest, primarily because services deals typically yield lower profit margins than software deals. However, he also mentioned that the pact symbolizes Palantir’s deep-rooted ties with the United States and predicts a favorable outlook for the company’s revenue growth in the fourth quarter of this year and beyond.
Palantir Technologies stock is trading at $15.17 as of press time. This represents a 2.15% increase compared to the previous trading session.