Given the recent escalation of conflict in the Middle East, one might assume Palantir Technologies (PLTR +2.53%) is arguably in a good position to benefit. The company started as an artificial intelligence (AI) stock for the military when the AI field was in its infancy, and the fact that its technology helped the government find international terrorist Osama bin Laden added to its prestige.
However, Palantir has struggled since the war with Iran began on Feb. 28, and valuation is likely a factor in the share price's volatility (the stock rose as much as 17% before falling 24% and now hovers at a 3% gain). Still, investors in the SaaS stock may dismiss the added defense-related growth for this forgotten reason.
Image source: The Motley Fool.
Why the conflict may not benefit Palantir
The war is less of a catalyst for Palantir because the commercial side of the business has become Palantir's primary growth engine. This appears in what investors can see from its growth figures. U.S. revenue for the segment grew by an astounding 75% in 2025, well above the 56% for the overall company.
Still, that breakdown is notable. In 2025, U.S. commercial revenue grew by 109% to $1.47 billion. Though U.S. government revenue was $1.86 billion, it grew at a comparatively slower 55%, indicating that commercial applications are increasingly the company's primary focus.
Admittedly, President Donald Trump reveres Palantir for its "great warfighting capabilities," and an active war could slow that trend temporarily as it presumably forces the U.S. government to rely more heavily on Palantir.
Still, that is only one client, a reminder that Palantir continues to pursue more commercial customers to diversify its client base.
NASDAQ: PLTR
Key Data Points
Indeed, investors should also remember Palantir's 214 price-to-earnings ratio, a near-term headwind that could negate performance improvements on the government side of the business amid the conflict in the Middle East. That means it will probably take continued success on the commercial side of the business to overcome the stock's high valuation.
