Privately held defense stock Anduril Industries is shaking up the defense industry. Palmer Luckey, co-founder of the company, is on record saying it's "important" for Anduril to IPO, and, in fact, the company is "on a path to being a publicly traded company" after doubling its 2024 revenue to $1 billion.

And now investors need to ask themselves: If $1 billion in revenue is enough to support an IPO for Anduril Industries, what would it mean if Anduril could do $22 billion?

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Anduril's gigantic Microsoft news

In a shocking development, Anduril announced earlier this month that it is partnering with Microsoft (MSFT 1.14%) to develop an Integrated Visual Augmentation System (IVAS) for the U.S. Army. But the more you learn about this news, the less it looks like a "partnership," and the more it looks like a wholesale takeover by Anduril of this $22 billion project.

As Anduril describes it, partnering will put Anduril in charge of developing and producing the software and hardware for IVAS, which is a wearable headset with both virtual reality and augmented reality aspects. Microsoft, which won the contract in 2021, valued at $21.9 billion over 10 years, previously handled all these roles.

Now Microsoft will be relegated to just offering its Azure cloud services to support the development of the artificial intelligence software that IVAS will employ.

What is the U.S. Army's IVAS?

Anduril's primary mission will be to build into IVAS such capabilities as "beyond line-of-sight perception" and "increasing combat effectiveness," with a focus on "survivability against drones, and accelerating mission command of unmanned systems." While a little on the vague side, this is enough information for us to guess at a primary use case.

When soldiers launch surveillance drones, for example, information can be fed back directly into the operator's headset, and headsets of everyone on his team, enabling them to see the entire battlefield even beyond line of sight. Similarly, the IVAS headset could be used to see through loitering munitions (kamikaze drones) and direct them to their targets. All of this, of course, lines up perfectly with Anduril's primary focus on developing artificial intelligence-powered drones for the military.

Which is to say, Anduril's the logical choice for this contract. It probably always was. And now, through its "partnership" with Microsoft, Anduril will be able to do what it's best at, while Microsoft gets back to what it seems to be best at: making money from Azure.

Image source: Getty Images.

What this means for Anduril

I'm not the only one who seems to think this is great news for Anduril -- and a promising development in the company's march toward an eventual IPO. As CNBC points out, Anduril is currently in talks to raise "up to $2.5 billion in new funding at a $28 billion valuation."

Now, this valuation was presumably predicated on Anduril being a $1 billion-a-year revenue company, albeit one with already a strong growth profile. (Anduril's sales reportedly doubled in 2024.) Assuming the U.S. Army approves Anduril's taking over most of Microsoft's responsibilities under IVAS, however, Anduril's revenue could quickly triple in size. A $22 billion contract, spread over 10 years, works out to $2.2 billion in additional revenue for Anduril, added on top of its existing $1 billion.

Long story short, if Anduril stock was believed to be worth $28 billion just a few weeks ago, winning the IVAS contract could be enough to lift the company's valuation to as much as $90 billion in an IPO.

And long story even shorter? If you can find a way to invest in Anduril stock pre-IPO, that will probably work out very well for you.