Palantir (PLTR) stock dropped recently following a report from the Washington Post. The article indicated that the Trump administration has directed the Pentagon to prepare for significant budget cuts over the next five years.
On Wednesday, the shares fell by 10%, with a speedy decline in the last hour of trading. Early Thursday marked another drop of over 5%.
According to the Washington Post, Defense Secretary Pete Hegseth informed Pentagon leaders to aim for an 8% reduction in the defense budget each year. This could lead to cuts amounting to tens of billions of dollars.
In a memo, Hegseth stated, “Our budget will resource the fighting force we need, cease unnecessary defense spending, reject excessive bureaucracy, and drive actionable reform including progress on the audit.”
However, not all areas will be affected by these cuts. The report specified that 17 categories, including U.S. border operations and munitions acquisitions, would be exempt.
Palantir, known for its AI software used in government surveillance, generates a significant portion of its revenue from government contracts, especially from the Department of Defense. Over half of their earnings in the latest quarterly report came from this sector.
In December, the Financial Times noted that Palantir was also discussing forming a consortium with competitors like Anduril to pursue U.S. government contracts.
Despite the recent downturn, Palantir’s stock has performed well in 2025, rising more than 48% so far this year. It ranks as the second-best performing stock in the S&P 500, with an impressive 350% gain over the past year.
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Washington Post, Pete Hegseth, Palantir, stock, Pentagon
