While most IT defense contractors faced heavy selling pressure on Thursday following Accenture plc’s (ACN) disappointing guidance and the Department of Defense’s (DoD) announcement of $580 million in spending cuts, Palantir Technologies Inc. (NYSE: PLTR) bucked the trend. The stock climbed 1.50% to $87.39 during regular trading before trimming some gains in the after-hours session.
Defense Cuts Rattle the Sector
The sell-off in IT defense stocks was triggered by Accenture’s fiscal Q2 earnings report, which, despite beating estimates, offered weak guidance. CEO Julie Sweet warned of procurement slowdowns and increased scrutiny on government contracts, contributing to market jitters.
The DoD’s subsequent announcement exacerbated the decline. Defense Secretary Pete Hegseth confirmed the department’s termination of $580 million in contracts and grants, focusing on programs misaligned with President Donald Trump’s administration priorities.
Among the terminations was a software development program for the Defense Civilian Human Resources Management System, cut due to cost and time overruns. The Pentagon also canceled external consulting contracts, including $30 million for unused software licenses and $360 million in grants.
IT defense giants such as Accenture (ACN), CACI International Inc. (CACI), Gartner Inc. (IT), Science Applications International Corp. (SAIC), and Booz Allen Hamilton Holding Corp. (BAH) all fell sharply, weighed down by the spending cuts and reduced growth expectations.
Palantir’s Strength Amid the Storm
In contrast, Palantir emerged as a rare winner. The company generates over 63% of its revenue from U.S. government contracts, accounting for $1.20 billion of its $1.90 billion in total 2024 revenue. Despite the DoD’s spending cuts, Palantir’s focus on high-priority defense projects and mission-critical software appears to have insulated it from the broader weakness in IT services.
Adding to the bullish sentiment, Palantir is set to join the S&P 100 Index on Monday. This inclusion is expected to drive increased demand and liquidity, as index funds and ETFs tracking the S&P 100 will need to add PLTR shares.
Investor Sentiment Remains Divided
Retail investors showed mixed reactions. While some grew concerned about the DoD’s cuts and potential ripple effects, bullish holders remained confident. One investor speculated that Palantir could become the fastest company to reach a $1 trillion market cap, citing its growing dominance in the AI and defense tech sectors.
Palantir has gained over 15% year-to-date, though it remains below its all-time high of $125.41, reached on February 19.
Investor Takeaway
Palantir’s resilience amid the sector-wide sell-off highlights its strong government ties and its increasing foothold in the defense sector. With its S&P 100 inclusion on the horizon and a robust government revenue stream, the company remains well-positioned, even as broader IT defense stocks face headwinds from reduced government spending.
For long-term investors, the recent pullback from Palantir’s all-time high may present a compelling accumulation opportunity, particularly as the company continues to capitalize on its AI capabilities and expanding government contracts.
