Palantir Technologies (PLTR 0.41%) has endured a torrid time on the stock market so far in 2026, losing 12% of its value as of this writing. The stock, however, has been in turnaround mode this month.
Specifically, Palantir stock has rallied 14% in March. Let's see why this has been the case and check whether the stock's newfound momentum is sustainable.
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The Middle East conflict has given Palantir stock a boost
Palantir has reported impressive acceleration in growth in recent years, driven by the rapid adoption of its artificial intelligence (AI) software platform. However, the valuation and concerns about the threat to Palantir's business posed by AI start-up Anthropic's Claude model have been weighing on the stock.
NASDAQ: PLTR
Key Data Points
Now, tensions in the Middle East have revived investor confidence in Palantir stock. While the tech-heavy Nasdaq Composite index is flat in March, Palantir has risen impressively. Wall Street believes that the Middle East conflict may have a positive bearing on Palantir's business.
After all, the company generated 40% of its total revenue from the U.S. government in the fourth quarter of 2025, up 66% from the year-ago period. Palantir has been a beneficiary of several U.S. government contracts over the years. It provides AI-powered software solutions to the U.S. Army and other services, including the Navy and the Air Force.
It won a $10 billion contract from the U.S. Army in August 2025 to "enhance military readiness and drive operational efficiency while delivering significant cost efficiencies." So, there may be a chance that the ongoing Middle East conflict will help Palantir convert that sizable contract into actual revenue.
Analysts at institutional brokerage firm Rosenblatt Securities believe that Palantir's government-related contract pipeline could strengthen in the wake of the ongoing conflict. As a result, Rosenblatt analysts have raised their price target on Palantir stock to $200 from $150, suggesting 27% upside from current levels.
Can Palantir indeed deliver more upside?
It remains to be seen whether the Middle East conflict boosts Palantir's business, but it is worth noting that its commercial business is also in solid health. The company's commercial revenue jumped by 82% year over year in Q4 2025, accounting for 48% of its top line. Palantir added just over 200 commercial customers in the quarter.
Palantir's commercial customers have been known to expand the deployment of its software solutions after signing the initial contract, which is why the strong growth in their count in Q4 is a good thing. Not surprisingly, Palantir is expecting a 60% increase in its revenue in 2026, up from 56% last year. Analysts are forecasting a 76% spike in earnings this year, though don't be surprised if it does better than that due to the strength in both the commercial and government businesses.
A potential outperformance could help Palantir sustain its momentum. However, investors should remain aware that this AI stock is still trading at a premium 130 times forward earnings, a valuation it needs to keep justifying by comprehensively beating Wall Street's expectations to deliver more gains.
