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3 Reasons Palantir Is Unavoidable in AI Infrastructure by 2026

Written by Chris Markoch on December 22, 2025 

In Brief

• Palantir’s AIP platform is driving profitability by helping enterprises monetize AI investments today, not years from now.
• U.S. commercial revenue is accelerating rapidly, reducing reliance on government contracts while expanding total growth.
• Long-term government contracts continue to expand, supporting strong annual recurring revenue and high visibility.

Palantir Technologies Inc. (NASDAQ: PLTR)continues to be a polarizing stock. Despite being up more than 155% in 2025, many investors remain concerned about the company’s valuation.

That’s understandable, even for investors used to richly priced technology stocks, PLTR stock trades at an expensive valuation. But investors who are solely focused on valuation may be missing the larger story.

Palantir is rapidly becoming a must-have platform for both public and private sector companies that are looking to monetize artificial intelligence (AI). That’s why investors should have confidence that Palantir’s growth story is still in the early stages.

But it’s also fair to say that the honeymoon phase is likely over. The parabolic move that PLTR stock has made since trading under $20 is transitioning into a more mature phase of growth. However, growth is still growth, and many analysts believe that a $500 price target in the next three to five years is not only possible, but probable.

Here are three reasons to believe that Palantir has earned its status as a core AI infrastructure stock in 2026 and beyond.

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AIP Adoption Is Helping Palantir Scale Profitability

Palantir has become a profitable company. But it’s also showing that it can grow its earnings year-over-year (YOY). A key reason for that growth is the company’s AIP platform. This is allowing companies to extract insights from the data they’re collecting that they can’t get anywhere else.

A concern among analysts is how and when companies will be able to monetize their capex spend in artificial intelligence (AI). With platforms like AIP, Palantir is answering both the how and the when, which is right now.

A key reason why companies are making Palantir their first call is that the company’s platforms are allowing companies to find cost savings, but also to generate actionable insights they can’t get anywhere else.

This is making Palantir an essential part of the AI infrastructure story from the software side. Much of the focus is on the hardware side. However, investors should be paying attention to a company that is providing the picks and shovels on the software side, and one of those names is Palantir.

Commercial Revenue Continues to Grow

One of the objections to Palantir has been the company’s reliance on government contracts. However, that’s becoming a worn-out talking point. In its most recent quarter, Palantir posted U.S. commercial revenue growth of over 121% YOY and over 29% from the prior quarter.

The company’s split between commercial and government revenue isn’t quite 50/50, but it’s getting closer. There’s also no doubt that its more explosive growth is coming on the commercial side.

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Government Contracts Grow Palantir’s ARR

An important distinction to make regarding Palantir’s commercial revenue is that it’s not coming at the expense of its government revenue. Palantir’s government business was up 55% YOY in the last quarter.

The nature of these contracts creates a powerful driver of annual recurring revenue (ARR) because Palantir’s platforms are embedded in long-term, mission-critical contracts with high renewal rates. U.S. and allied government agencies use Palantir’s Gotham and Foundry platforms for defense, intelligence, border security, healthcare, and disaster response. These use cases are difficult and costly to replace once deployed.

Government contracts are typically multi-year in nature and often expand over time as agencies add users, modules, and new operational workflows. This “land-and-expand” dynamic increases contract value and boosts ARR without requiring Palantir to constantly win new customers.

For example, in 2025, Palantir continued to grow its government ARR through expansions and renewals of long-term federal contracts, including added funding under the U.S. Army’s multi-year Vantage data and AI platform as its use broadened across logistics, readiness, and operational planning. It also signed a renewed and extended Gotham analytics agreement with U.S. Immigration and Customs Enforcement, reinforcing a recurring, mission-critical revenue stream with high visibility and strong retention.

As global defense spending rises and governments increasingly prioritize data integration and AI-driven decision-making, Palantir is well-positioned to secure contract extensions and new awards, reinforcing the government segment as a durable and growing source of ARR.

Read this article online ›

Further Reading

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• Best $19 you’ll spend this year. (From Brownstone Research)
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• RKLB, ASTS, TDG: Insiders are Selling These 3 Space Stocks
• Instacart Got Caught Surveillance Pricing… But Investors Didn’t Care
• Broadcom Just Raised Its Dividend—But It’s Not the Only One Signaling Strength

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