A record $1.6 billion contracted backlog, up 17.9% year-over-year as of March 27, is the figure that frames Mercury Systems' (MRCY) new workflow automation collaboration with Palantir Technologies (PLTR). Of that total, $891 million represents orders expected to convert to revenue within the next 12 months. Mercury is integrating its data sources onto Palantir's Foundry platform across two initial workflows covering material planning and manual workload reduction, a direct response to Department of Defense pressure to shorten delivery timelines across the defense industrial base.
Q3 FY2026: the numbers behind the partnership
Mercury Systems posted Q3 fiscal 2026 revenue of $235.8 million, up 11.5% YOY and 12.06% above the analyst consensus of $214.1 million. Non-GAAP EPS reached $0.27, a 350% beat against the $0.06 consensus estimate and up from $0.06 in the prior-year quarter. Domestic revenue, which accounted for 88% of the total, grew 17% YOY, with the largest booking contributions from missile, C4I, and space programs.
CEO William Ballhaus noted that approximately $25 million of revenue and $15 million of adjusted EBITDA were pulled forward from Q4 into Q3 as supply execution improved. Management raised its full-year adjusted EBITDA margin outlook to mid-teens and now targets annual revenue growth approaching mid-single digits. Positive free cash flow is projected in Q4 fiscal 2026. Net working capital has been cut by $225 million, or 34%, from its Q1 fiscal 2024 peak, with an $18.7 million YOY decline in the most recent quarter.
Mercury also expanded its Phoenix, Arizona facility by 50,000 square feet and acquired SolderMask, a specialized process technology provider, to support programs currently ramping. Three consecutive quarters of improving execution precede the Palantir collaboration.
What the stock reflects
MRCY shares hit an all-time high of $128.45 on July 6, 2026, a 147.7% gain from the 52-week low of $51.86, before pulling back to approximately $99 by late July. Market capitalization stands at $5.83 billion. Year-to-date, MRCY is up 44.9%, against 22.5% for the S&P 600 Small-Cap Index.
Ten analysts carry a consensus "Moderate Buy" rating: six Strong Buy, one Moderate Buy, two Hold, one Strong Sell. The mean price target of $106.56 sits only modestly above the late-July price. The Palantir workflows and Phoenix capacity expansion are operational positives, but the $25 million of Q4 revenue already pulled into Q3 means the next quarter carries a gap that management's FCF milestone will need to fill.