Palantir Technologies (NASDAQ:PLTR) could see a boost in government contracts and federal IT spending, according to Wedbush Securities, which says its Washington, D.C., checks suggest growing confidence in the company's role in key projects.

Analysts led by Dan Ives pointed to the efficiency-focused DOGE initiatives as a major opportunity for Palantir, as government agencies look for AI-driven software to streamline operations. Wedbush believes this could translate into more contracts and bigger IT budgets for Palantir in the FY25 and FY26 federal budget cycles.

Palantir's stock has taken a hit recently, dropping nearly 33% over the past two weeks after Defense Secretary Pete Hegseth called for an 8% annual cut to defense spending over the next five years. But Wedbush argues that Palantir is deeply embedded in high-priority defense programs that are unlikely to be affected. The firm reaffirmed its Outperform rating and $120 price target, saying the company is well-positioned to thrive despite tighter budgets.