Palantir Technologies (NYSE:PLTR) is wrapping up May with a bang, with its announced win of a $480 million AI contract with the U.S. Department of Defense. Palantir stock has moved slightly higher on this news, but this contract award could mark the start of another strong run for this AI software play.

Over the past year, this purveyor of artificial intelligence and machine learning software platforms has had major initial success with its efforts to capitalize on the rising adoption of generative AI technology, with its Artificial Intelligence Platform.

However, most of this initial success has been in the commercial sector. While helping to drive strong growth for its commercial segment, Palantir’s governmental unit has been a growth laggard. Now though, this could start to change, boding well for the stock’s future price performance.

Palantir Stock, the Contract Win, and the Big Picture

Admittedly, the aforementioned contract win alone may not necessarily move the needle for Palantir, in terms of revenue and earnings. While a big ticket contract at $480 million, this contract to provide a prototype of its Maven AI system has a completion date five years out.

But besides the potential for related work to be awarded, as you may have inferred from what we said above, this contract win may be a sign that Palantir’s governmental segment is about to experience growth re-acceleration in a big way.

We’re not saying that the governmental segment growth, which came in at 16% last quarter, is going to catch up to commercial segment growth, which came in at 27% last quarter. However, after re-accelerating to 16%, from 11% last quarter, growth for the Defense unit may be on its way toward re-hitting annualized levels exceeding 20%.

With governmental sales still making up a majority of Palantir’s overall business, present and future success with the company’s “AIP for Defense” rollout could translate into a level of growth that may lead to results that handily beat current expectations. You can imagine what sort of impact this may have on the Palantir stock price.

A Clearer Path Back to Past Highs Is Emerging

PLTR currently trades for around $21.50 per share. Ahead of Palantir’s latest earnings release earlier this month, investors almost bid it back up above $25 per share, but a mixed reaction to quarterly results, knocked it down to current levels.

Again, it’s unclear how much the defense contract win news will provide a lift for Palantir stock. In fact, shares could tread water in the near term.

However, this could change in the coming quarters. Subsequent earnings releases, combined with further “AIP for Defense” developments, may help to spark the next major rally.

Further success kicking the governmental segment back into growth high gear may increase confidence that Palantir will beat, not merely meet, expectations.

The high end of sell-side financial forecasts for 2024 call for the company to report $2.8 billion in revenue, and 37 cents in earnings per share. In other words, 25.9% revenue growth, and a nearly fourfold jump in EPS.

Greater-than-expected success this year could also boost confidence of a revenue and earnings topper in 2025. Hence, a clearer path to past highs may be emerging. A return to $30, or even $40 per share may be closer than you think.

Bottom Line: Feel Free to Buy on Weakness

Yes, you may be thinking that a return above $40 per share for PLTR doesn’t pencil out. The stock is already pricey at 63.4 times forward earnings. Absent any additional multiple expansion, Palantir may need to double its earnings in order to double its share price.

However, this may not be as tall of an order as it seems. As we’ve argued before, as Palantir matures, it may be able to raise its margins far greater than currently anticipated, as it takes its foot off the growth gas pedal.

That said, keep in mind that patience is key. While it may happen sooner than you think, a Palantir stock comeback probably isn’t happening next week, or even next month. However, if you believe in the bull case, seize the opportunity, by accumulating a position while shares remain down on weakness.

Palantir stock earns a B rating in Portfolio Grader.

On the date of publication, Louis Navellier had a long position in PLTR. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.