Why Palantir Stock Climbed 12.7% in December

Palantir (NASDAQ: PLTR) stock posted another month of strong gains in December's trading. The company closed out the period with its share price up 12.7%, according to data from S&P Global Market Intelligence.

Palantir was one of 2024's hottest stocks, and it ended the stretch with another month of double-digit gains. The company's share price rose in conjunction with new contract wins and reports of a potentially disruptive new partnership aimed at making waves in the defense industry.

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Palantir continues to strengthen its position in defense

Palantir continued to rack up defense-industry wins last month. On Dec. 6, Palantir announced it had partnered with Booz Allen Hamilton to accelerate U.S. defense technology innovation. Several days later, the company announced it had secured an expansion of its contract with U.S. Special Operations Command to provide technology solutions and support services. The one-year contract is valued at $36.8 million.

On Dec. 18, news broke that Palantir had won an extended contract with the U.S. Army. The partnership will see the company provide services in support of the Army Data Platform and will be worth roughly $400.7 million over a four-year period. Provisions within the deal could push the total contract value up to roughly $618.9 million over the period. Palantir has been scoring some big wins in the public sector, and it looks like momentum on that front is poised to continue.

On Dec. 22, The Financial Times published a report stating that Palantir and Anduril are looking to form a next-generation defense consortium. Anduril is an innovation-focused defense technologies company founded by Palmer Luckey, the founder of the Oculus virtual reality company sold to Meta Platforms in 2014. Like Palantir, Anduril has already won U.S. defense contracts.

What comes next for Palantir stock?

Palantir has been on an incredible winning streak. On the heels of its 2024 gains, the company has climbed 3.5% early in 2025's trading.

In addition to new partnerships and overall excitement surrounding the artificial intelligence space, Palantir has been serving up some very encouraging business performance. In the third quarter, the company's revenue increased 30% year over year to reach $726 million.

Meanwhile, the company's net income more than doubled to hit $149.3 million, and its adjusted free cash flow more than tripled to reach $434.5 million. With a net income margin of 20% and a free-cash-flow margin of 60% in Q3, Palantir is posting fantastic levels of profitability. At the same time, the business is scaling rapidly and still has plenty of room for long-term expansion.

On the other hand, there's a lot of strong growth already priced into Palantir's valuation. The company is currently valued at roughly 168 times this year's expected earnings and approximately 52 times expected sales. So, while Palantir is proving to be a fantastic business and appears to have a great future, investors should also keep in mind that the company's highly growth-dependent valuation opens the door to volatility.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Palantir Technologies. The Motley Fool recommends Booz Allen Hamilton. The Motley Fool has a disclosure policy.