Shares of Palantir (PLTR) declined more than 6% on Friday. The fall came after a U.S. Army memo raised concerns about serious security flaws in a battlefield communications system co-developed by Palantir and defense startup Anduril Industries. The news was reported by Breaking Defense and Reuters.
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The system, known as NGC2 (Next Generation Command & Control), is designed to connect soldiers, sensors, vehicles, and commanders in real-time. But according to the memo, the prototype suffers from “fundamental security” issues and should be classified as “very high risk.”
It must be noted that in July 2025, Anduril was awarded a nearly $100 million contract to create a prototype of the NGC2 platform for the U.S. Army. Palantir and Microsoft (MSFT) were named as partners on the project.
Key Concerns in the System
The memo, authored by the Army’s chief technology officer, Gabrielle Chiulli, highlighted several security gaps in the NGC2 system.
Firstly, any authorized user can access all applications and data regardless of their security clearance level or operational necessity. This raises the risk of sensitive information being misused.
Also, the system currently has no logging feature to track user actions. This makes it impossible to audit who accessed sensitive data or what they did with it.
Finally, several third-party modules have not undergone Army security checks. One application was found to contain 25 high-severity code vulnerabilities, while three others under review had over 200 flaws each.
The memo summarized the security failures by stating, “We cannot control who sees what, we cannot see what users are doing, and we cannot verify that the software itself is secure.”
What’s Next for Palantir?
Palantir stock, which has surged over 133% year-to-date due to optimism about its defense and AI contracts, took a hit as investors weighed the reputational damage.
The company and its partner Anduril will likely need to address the problems quickly, fixing coding flaws, tightening access controls, and adding user tracking features.
Meanwhile, the Army’s chief information officer, Leonel Garciga, clarified that the memo was part of a normal process to identify and mitigate cybersecurity risks during the development phase of the prototype.
Still, with the “very high risk” designation, the Army is expected to continue testing the system, which could slow down its deployment.
Is PLTR a Good Stock to Buy Now?
Turning to Wall Street, PLTR stock has a Hold rating, based on five Buys, 13 Holds, and two Sells assigned in the last three months. The average Palantir stock price target is $157.33, which implies a downside risk of 11.14% from current levels.
