Palantir (NYSE:PLTR) shares are up more than 2% premarket following news it has won a $250 million contract with the US Defense Department (DoD) to continue to conduct research and development services in artificial intelligence (AI) and machine learning (ML) for the US Army.
The share price increase adds to the company's over 6% gain on Wednesday. It currently sits around the $15.20 per share level.
The new contract extends an original one-year deal by three more years to 2026. The company was originally awarded a one-year $40M contract in September 2022.
In a note Thursday, BofA analysts, who maintained a Buy rating and $18 price target on PLTR shares, explained that in March 2023, the one-year deal was increased by $60M and "under this contract, PLTR has been obligated $92.2mn in FY23."
"While the annualized award levels do not imply upside from current offerings, we positively view the long-term award as it provides a) near-term revenue security, b) upside opportunities (as shown by the original contract modification), and c) a unique position to work closely with the Department of Defense (DoD) developing the nextgen AI and ML solutions," they said.
"We see the new extended award as a signal that PLTR is executing on its approach to deeper DoD penetration with AI/ML applications," the analysts added.