- - Forget SoundHound AI: This Enterprise AI Stock Is Turning Government Contracts Into a Cash Machine

James Hires, The Motley FoolFebruary 12, 2026 at 5:31 AM

0

Key Points -

Palantir is a leading AI company with products catering to both government and commercial needs.

Its largest customer is the U.S. military, which is spending billions on its software.

The company's latest results demonstrated rapid growth, high profitability, and negligible debt.

10 stocks we like better than Palantir Technologies ›

Artificial intelligence (AI) is perhaps the biggest story to hit the stock market since the internet 20 years ago. AI stocks have had an incredible bull run collectively over the past few years.

But now the hype is beginning to cool, and simply being an AI company isn't enough to draw in investor dollars anymore. For proof, look no further than SoundHound AI. Since its stock's most recent peak at about $20 in October 2025, it has lost over half its value and is trading at $8.50 at the time of this writing.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »

But not every AI name is struggling. Palantir Technologies (NASDAQ: PLTR) released some fantastic fourth-quarter and full-year 2025 results recently, and over the past 12 months, its shares are up 29%. So we're beginning to see which AI companies are starting to flounder and which have real staying power.

Palantir is the second kind, so let's look at its special sauce.

A satellite map of the U.S. with network nodes rendered atop it.

Image source: Getty Images.

The military's crystal ball

Palantir gets its name from the seeing stones of J.R.R. Tolkien's legendarium. In his books, they allowed their user to see far-away events or communicate instantaneously across vast distances. That's essentially what the company does for its clients, chief among them the U.S. government.

Its Gotham software essentially puts all the information available about a battlefield into a single interface . Its Maven Smart System (MSS) is a platform specifically designed for the U.S. military for intelligence analysis.

In August 2025, the Army signed a contract with Palantir that could be worth up to $10 billion over the next decade. Then, in September, the Marine Corps acquired a new enterprise license from the company to deploy the MSS across the branch. There is no disclosed dollar agreement for the Marine Corps contract. But based on a previous $480 million five-year agreement with the Department of Defense for MSS from 2024 (for which the department later increased the ceiling to $1.9 billion), pundits can extrapolate it's probably pretty lucrative for Palantir.

Maven got another win on Sept. 20, 2025, when the Army Research Laboratory signed a contract worth $99.8 million over the next five years to expand MSS' use across the military.

It's no wonder the U.S. military favors Palantir products when you consider the workflow optimization that Palantir's software allows. It reportedly reduced defense contractor General Dynamics' submarine schedule planning from 160 hours to 10 minutes and cut the material review process for the Portsmouth Naval Shipyard in Maine from several weeks to under an hour.

It's not just the American military, either. In September, the United Kingdom pledged to extend an existing deal to buy $1 billion worth of the company's software over the next five years.

And it offers a commercial AI product called Artificial Intelligence Platform (AIP), which has been adopted by companies including Lowe's and Lockheed Martin.

The exact nature of Palantir's software capabilities is difficult to discern. In the case of its military software, the reason is obvious: The U.S. military doesn't want everyone to be aware of what its latest electronic platform can do. But if it didn't work well, the military would not be shelling out billions to use it.

And that brings me to Palantir's latest results.

Fantastic growth

For the 2025 fourth quarter, Palantir saw overall revenue increase 70% year over year to $1.41 billion and its U.S. revenue go up 93% to $1.08 billion. U.S. commercial revenue was up 137% and U.S. government revenue grew 66%.

Most of Palantir stock's 28% bull run over the last year was due to its commercial growth with the AIP platform. But the company's single biggest customer remains the U.S. government.

For the whole of 2025, the company saw its revenue increase 56% year over year to $4.48 billion. U.S. revenue rose 75% to $3.32 billion, with U.S. commercial revenue up 109% and U.S. government revenue up 55% over 2024. In addition, the company ran an operating margin of 50% for 2025 and an adjusted free cash flow margin of 51%.

The company also held $7.2 billion in cash, cash equivalents, and short-term U.S. Treasury securities by the end of 2025. Its total debt stands at just $229.3 million, which is a pittance in comparison to its cash reserves.

Incredible growth and profitability with lots of cash and low debt is always a winning combination.

Palantir Technologies is worth a look if you want to invest in an AI company with real staying power and billions of dollars in pending government contracts to sustain its growth for years to come.

Should you buy stock in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $443,353!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,155,789!*

Now, it’s worth noting Stock Advisor’s total average return is 920% — a market-crushing outperformance compared to 196% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

See the 10 stocks »

*Stock Advisor returns as of February 11, 2026.

James Hires has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies and SoundHound AI. The Motley Fool recommends Lockheed Martin and Lowe's Companies. The Motley Fool has a disclosure policy.

Original Article on Source

Source: “AOL Money”