Palantir Technologies (PLTR +2.53%) was a pioneer in artificial intelligence (AI) long before the technology went viral in recent years. The company's cutting-edge algorithms and data mining capabilities have been adopted by governments and enterprises alike. Investors have focused on the rise of Palantir's Artificial Intelligence Platform (AIP), which has been the primary driver of its recent growth spurt. Nevertheless, the company's government contracts stole the spotlight this week, as Palantir landed its next major deal.
In a press release that dropped on Wednesday morning, Palantir announced a $300 million purchase agreement with the U.S. Department of Agriculture (USDA).
Image source: The Motley Fool.
Making hay
The blanket purchase agreement (BPA) aims to modernize the USDA process for delivering services to U.S. farmers. It is an expansion of an existing relationship between Palantir and the federal agency. The USDA's "One Farmer, One File" initiative was designed to reduce red tape and simplify the process for farmers to apply for assistance. The deal aims to streamline procedures to support the National Farm Security Action Plan.
Palantir's role will be to create operational software solutions that will help the USDA better serve farmers. The goal will be to improve supply chain resilience, reduce fraud, waste, and abuse, and shield farmers and farm programs from security risks.
The deal builds on the existing partnership between the USDA and Palantir, which produced the USDA's Landmark software platform, backed by Palantir, and the rollout of the $11 billion Farmer Bridge Assistance Program in February.
The program was an undeniable success. "Within 62 minutes of opening, the program broke all prior USDA records for online farmer sign-ups -- allowing farmers to enroll without visiting a county office and delivering over $4.4 billion directly to farmers in the program's first five days," according to the press release.
Addressing a critical need
Farmers have had a tough go of it in recent years. The global pandemic exposed weaknesses in the supply chain that moves food from farm to table, resulting in consumer shortages and farmer hardships. The trade war has fueled rising supply costs, and shipping disruptions caused by the war with Iran led to a spike in fertilizer prices -- all of which is weighing on American farmers.
The USDA has been working to upgrade and consolidate fragmented legacy systems into a single, secure, unified platform that helps the agency "work efficiently, reduce administrative burdens, and accelerate services and payment to farmers."
NASDAQ: PLTR
Key Data Points
What it means for investors
Palantir had a breakout year in 2025. Revenue of $4.5 billion grew 56%, accelerating throughout the year. U.S. commercial revenue -- fueled by adoption of Palantir's AIP -- grew 109%, while U.S. government revenue climbed 55%. Earnings per share (EPS) of $0.63 surged 163%, and the company's remaining performance obligation -- contractually obligated revenue that hasn't yet been recognized -- soared 143% to $4.2 billion.
These results show that a $300 million contract won't move the needle financially. However, it does illustrate the growing reach of Palantir's technology and the novel ways it is being deployed to solve existing problems. It also shows how just one U.S. government agreement can add hundreds of millions or even billions of dollars to the company's backlog. Every dollar in the company's RPO lays the foundation for Palantir's future success.
The stock is selling for 81 times next year's expected earnings, which seems frothy at first glance, but consider this: Palantir is guiding for revenue growth of 60% to roughly $7.2 billion in 2026, with its U.S. commercial business expected to grow by at least 115%. Growth of that magnitude supports a premium valuation.
Palantir is certainly a higher-risk, higher-reward stock, but in my opinion, it's a buy.
