Which Is a Better Defense Stock: Palantir or Rocket Lab?

The defense and space sectors are undergoing a seismic shift, driven by geopolitical tensions, technological innovation, and surging government spending. Two companies at the forefront of this transformation are Palantir Technologies (PLTR) and Rocket Lab (RKLB). While both are positioned to benefit from the expanding defense and space economies, their business models, financial trajectories, and strategic priorities diverge significantly. This analysis evaluates which stock offers a stronger long-term investment case, focusing on earnings potential and strategic positioning.

Palantir: The AI-Driven Defense Powerhouse

Palantir has emerged as a critical player in the defense sector by leveraging its data analytics platforms to solve complex operational challenges for governments and militaries. Its Foundry and Gotham platforms are now embedded in mission-critical systems, from intelligence gathering to logistics optimization. For example, the company's $10 billion, 10-year contract with the U.S. Army consolidates 75 existing contracts into a single framework, accelerating the delivery of AI-enabled capabilities. Similarly, partnerships with Boeing and L3Harris Technologies are integrating Palantir's tools into defense production systems and space-based sensor networks.

Financially, Palantir has demonstrated exceptional growth and profitability. In Q3 2025, the company reported $1.18 billion in revenue, a 63% year-over-year increase, with U.S. commercial revenue surging 121% to $397 million. Its net profit margin has expanded to 28.1%, up from 18% in 2024, a rare feat for a high-growth tech company. This profitability is underpinned by recurring revenue from long-term government contracts and a shift toward higher-margin software-as-a-service (SaaS) models. Palantir's full-year 2025 revenue guidance now stands at $4.4 billion, surpassing Wall Street expectations.

Strategically, Palantir is transitioning from a software vendor to an orchestrator of AI ecosystems. Its recent partnership with Voyager Space to advance space technology and its role in the Army's TITAN program highlight its pivot toward integrating AI with space-based systems. This positioning aligns with the U.S. government's push for real-time data processing and autonomous decision-making in defense operations.

Rocket Lab: The High-Growth Space Launch Specialist

Rocket Lab, by contrast, is a pure-play space stock focused on launch services and satellite systems. The company's Electron rocket has achieved 59 successful missions as of Q1 2025, delivering over 200 spacecraft to orbit. Its recent $46 billion Enterprise-Wide Agile Acquisition Contract with the U.S. Air Force underscores its growing importance in defense logistics and satellite deployment.

Financially, Rocket Lab has posted impressive revenue growth, with Q3 2025 revenue reaching $155 million-a 48% year-over-year increase. However, profitability remains elusive. The company reported a net loss of $190 million in 2024, driven by heavy R&D investments in its Neutron rocket and other advanced systems. Its price-to-sales ratio of 42 raises valuation concerns, but the company's gross margins have improved to 37% (GAAP) and 43% (non-GAAP) in Q3 2025, signaling operational efficiency.

Rocket Lab's long-term potential hinges on the success of its Neutron rocket, a reusable medium-lift vehicle expected to enter service in 2026. This platform could disrupt the launch market by offering cost-effective access to space for defense and commercial clients. Additionally, the company's $1.1 billion revenue backlog, with 57% expected to convert within 12 months, provides visibility for future cash flows.

Strategic Positioning and Earnings Potential

The defense and space sectors are poised for sustained growth, with U.S. defense spending rising and the Space Force's FY 2026 budget requested at $40 billion. Both companies are well-positioned to capitalize on these trends, but their paths differ.

Palantir's strength lies in its recurring revenue model, high profit margins, and deep integration into defense ecosystems. Its ability to monetize AI and data analytics across multiple domains-ranging from intelligence to logistics-creates a durable competitive advantage. However, its growth is tied to government spending cycles and potential regulatory scrutiny.

Rocket Lab, meanwhile, is a high-risk, high-reward bet on the space economy. Its revenue growth is impressive, but its path to profitability is uncertain. The success of Neutron and its ability to scale launch cadence will be critical. Rocket Lab's exposure to the volatile space sector also makes it more susceptible to technical delays or market saturation.

Conclusion: A Tale of Two Strategies

For investors seeking a defense stock with proven profitability and a clear path to long-term earnings growth, Palantir appears more compelling. Its financial metrics, strategic partnerships, and ecosystem-driven approach position it as a cornerstone of the AI-powered defense landscape. Rocket Lab, while undeniably innovative, remains a speculative play on the space sector's potential, with earnings growth contingent on technological execution and market demand.

In a world where data is the new oil and space is the next frontier, both companies matter. But for those prioritizing earnings stability and strategic depth, Palantir's moat may prove harder to replicate than Rocket Lab's rocket.