BigBear.ai

BigBear.ai‘s (BBAI 4.16%) stock has been on a volatile ride on the market so far in 2025, but it still managed to clock impressive gains of 57% as of this writing. It’s worth noting that the stock is down 28.5% from the 52-week high it achieved in mid-February. For a company that is compared to Palantir Technologies thanks to their very similar business models, investors may now be wondering if the slide in BigBear.ai stock can be treated as a buying opportunity.

Let’s take a closer look at what BigBear.ai does and check if its prospects and valuation make it worth buying in the wake of its share price pullback.

Image source: Getty Images.

BigBear.ai stands to gain from a massive end-market opportunity

Just like Palantir, BigBear.ai is in the business of providing artificial intelligence (AI) software solutions to customers so that they can improve the efficiency of their operations and enhance productivity. It provides various kinds of tools related to data analytics, cybersecurity, enterprise IT solutions, digital twins, and digital identity.

The good part is that the demand for these AI software solutions is on track to grow rapidly. IDC projects that the AI software platforms market could generate a whopping $153 billion in revenue in 2028, up from $27.9 billion in 2023. The bad part is that BigBear.ai has been unable to make the most of this fast-growing opportunity.

The company’s recent results clearly indicate that it is missing the AI software opportunity. Its revenue was down by 18% on a year-over-year basis to $32.5 million. The gross margin shrank as well, which explains why its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss more than doubled to $8.5 million in Q2.

Of course, BigBear.ai reported a $380 million revenue backlog at the end of Q2 — up by 43% from the prior-year period — but it comes with a lot of caveats. The primary concern with BigBear.ai is that it gets the majority of its revenue from government contracts. That probably explains why a huge chunk of its revenue backlog is unfunded, or is up to customers’ discretion whether they want to purchase its services or not.

Just 4% of BigBear.ai’s backlog is funded, which refers to the remaining value of existing contracts that it has yet to fulfill. The remaining backlog is either unfunded or unexercised. So, despite reporting a healthy backlog, BigBear.ai doesn’t have solid revenue visibility going forward. Throw in the fact that BigBear.ai has reduced its full-year revenue forecast by 19%, and there is a good chance that the stock will remain under pressure until and unless there is a substantial turnaround in its fortunes.

The good part is that there have been some silver linings for BigBear.ai investors of late. The stock jumped recently on the news that it will support the U.S. Navy in a maritime exercise, giving investors hope that it could win more business. Additionally, BigBear.ai’s enhanced passenger processing (EPP) solution has been deployed at Nashville International Airport.

However, it remains to be seen if these developments are going to have a positive impact on the company’s financial performance.

Analysts aren’t upbeat about the stock’s prospects

BigBear.ai’s median 12-month share price target of $6 points toward a potential drop of 7% from current levels. That’s not surprising, as the company’s growth estimates have taken a big hit.

Data by YCharts.

Moreover, BigBear.ai stock isn’t exactly cheap right now. It trades at 12 times sales. That’s well above the Nasdaq Composite index’s price-to-sales ratio of 5. With the company’s sales set to decline in double digits this year as per its updated guidance, its rich valuation isn’t justifiable. All this tells us that this AI stock isn’t worth buying even after its recent pullback, which is why investors would do well to take a closer look at other names that are clocking healthy growth and are trading at attractive valuations.

BigBear.ai (BBAI -5.74%) is a leader in providing artificial intelligence (AI) technology for national security. Investor optimism about increasing government investment in AI, and the potential impact on BigBear, has sent the stock up 361% over the last year.

President Donald Trump’s “big, beautiful bill” could be a catalyst, as it provides substantial funding for spending on defense technology. BigBear.ai believes it is well positioned to benefit, but does this make the stock a buy?

Image source: Getty Images.

BigBear.ai is aiming for large government deals

Revenue has been flat over the last three years. The company reported an 18% year-over-year decrease in revenue in the second quarter, driven by lower volume from certain Army programs.

While the loss of revenue from these Army programs was a setback, legislative tailwinds are in BigBear’s favor. The bill provides billions of dollars in funding for border security, which is one of BigBear’s specialties, where it supplies biometric solutions for traveler processing.

BigBear ended last quarter in a solid financial position. It has a net cash position of $248 million on its balance sheet — the strongest financial position in the company’s history. Management intends to invest aggressively in hiring top-tier AI talent and innovation to win a share of the funding going to national security programs.

The stock offers significant upside potential from a market cap of just $2.6 billion. But the company will have to prove it is up to the job and win more contracts, which is no guarantee. I would look at the stock like a call option on whether the company can land a big contract. This is a stock for those who are willing to accept high volatility for the potential of explosive returns if BigBear.ai can secure large government deals.

Shares of BigBear.ai (BBAI -4.94%), which uses artificial intelligence (AI) to help crunch large piles of data for its customers, tumbled in afternoon trading Thursday — on no obvious news.

As of 1:55 p.m. ET, the stock is down 7.1%.

Image source: Getty Images.

BigBear’s big news

BigBear.ai calls itself “a leading provider of mission-ready AI solutions and services for defense, national security, and critical infrastructure,” delivering “predictive analytics” to help users make decisions about complex data sets. As an example of its work, BigBear confirmed earlier this week that it’s playing a role in the Navy’s ongoing UNITAS 2025 maritime exercises, using AI tools to “improve coordination, decision-making, and threat detection in vast maritime operation zones where counter-narcotics, human trafficking, and arms smuggling are key concerns.”

That news helped propel BigBear to its highest stock price since mid-July, nearly $8 per share. However, while good PR for BigBear, the company’s press release didn’t mention any particular revenue benefit from its role — or make any promises that cooperation with the Navy will grow its business significantly.

Is BigBear.ai stock a buy?

This could be a problem for BigBear, which isn’t living up to its billing as a growth stock. Over the past five years BigBear’s grown revenue barely 1% per year, even as losses mount and cash burns down.

The good news for investors is that, with $390 million in the bank and only $113 million in debt, BigBear can continue consuming cash for more than a decade at its current burn rate (less than $28 million per year).

The bad news is that most analysts expect BigBear’s cash-burn rate to accelerate rather than holding steady, and indeed nearly double over the next two years. If this is how things play out, it’s probably best to be bearish on BigBear stock.

The S&P 500 has continued to notch new record highs this year, thanks in large part to soaring interest in artificial intelligence (AI) technology, which is fueling massive spending on both hardware and software. But as impressive as the S&P 500’s 17% gains over the past year have been, they pale in comparison to AI data analytics company BigBear.ai Holdings‘ (BBAI 9.63%) 273% climb over that period.

When a stock delivers returns like this in such a short amount of time, it’s understandable that some investors might start to think that buying and holding it could help them retire as millionaires. We’re in the early innings of AI, after all, so why can’t brighter days still be ahead for this stock?

Unfortunately, I don’t think that’s the right way to think about BigBear.ai. In fact, it might be best not to own this stock right now at all. 

Image source: Getty Images.

Why BigBear.ai stock is soaring

There’s a lot of optimism among investors right now surrounding artificial intelligence stocks, as companies and governments invest in AI data center infrastructure and increase their use of AI software. One way BigBear.ai is tapping into this demand is by offering AI logistics and analytics, which can improve the efficiency of everything from supply chains to national security.

Management says the company’s total addressable market was $80 billion in 2024, but it forecasts that it could grow to $272 billion by 2028 for the combined private and public sectors. Part of the enthusiasm for the company’s shares comes as the U.S increases its spending on AI defense, a market that could be worth up to $70 billion by the mid-2030s. BigBear.ai makes a “significant portion” of its revenue from government contracts, and AI defense is an important component of its potential.

Also, because AI stock enthusiasm is sky high right now, BigBear.ai has at times surged for no obvious reason. Case in point: Last week, after trending down over a period of a couple of months, it jumped by more than 10% in a single session on no news at all.

Why BigBear.ai won’t help you retire a millionaire

If the good news is that BigBear.ai’s stock has made impressive gains over the past year (albeit quite bumpy ones), the bad news is that the company has little to show in the way of growth. Revenue fell 18% year over year to $32.5 million in Q2, following another decline in Q1.

With sales slipping, management recently cut its revenue guidance for the year to about $132 million — 22% lower than the midpoint of its previous forecast. Lower sales volumes from some government contracts were the problem during the quarter, but upon closer inspection of the details, BigBear.ai’s situation doesn’t look much better.

The company’s gross margins slid to 25% in the quarter, down from nearly 28% in the year-ago period. That continued a pattern of inconsistency over the past year. Worse, BigBear.ai is nowhere near profitable. Its non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) came to a loss of $8.5 million in the quarter, significantly worse than its adjusted loss of $3.7 million in Q2 2024.

The picture that should be coming into focus here is that BigBear.ai isn’t much of a growth stock. A temporary slowdown in business could be forgivable, but that’s not happening with the company. Instead, its sales continue to slide, and its losses are widening.

With all that in mind, I have serious doubts that BigBear.ai stock could grow from here in a way that would help its shareholders retire as millionaires. The stock is riding the AI wave right now, but financial reality will eventually catch up with it.

BigBear.ai Holdings (BBAI -0.09%) has been a volatile stock to hold over the past year, with its price ranging between a low of $1.26 and a high of $10.36. Recently, the company reported earnings, and it has once again disappointed investors, sending BigBear’s stock back into another tailspin.

For all the hype and excitement surrounding the company’s artificial intelligence (AI)-powered business software, BigBear has failed to deliver strong results time and time again. In its most recent quarter, the company not only badly missed expectations, but it also slashed its guidance.

Is the stock in trouble, and could this be the start of a much bigger and prolonged sell-off for the tech company, or could BigBear make for a good contrarian buy today?

Image source: Getty Images.

Big miss highlights the company’s dependency on government contracts

On Aug. 11, BigBear reported its quarterly numbers for the period ending June 30. Revenue of $32.5 million declined by 18% year over year, and the company’s operating loss grew from $16.7 million to $90.3 million. With numbers like that, it’s not much of a surprise that the stock fell after the release of the report. Wall Street analysts were expecting revenue to come in around $40.6 million.

The reason for the big drop in revenue was a result of “disruptions” in the federal contracts the company has with the government, particularly with programs supporting the U.S. Army. The government’s “efficiency efforts” have impacted not only this past quarter’s results but also resulted in BigBear reducing its guidance for the full year. The company now anticipates its full-year revenue will be within a range of $125 million to $140 million, versus its previous guidance of $160 million to $180 million.

For investors, the concern is that government spending can have a significant impact on BigBear’s financials and dictate its growth. The company needs to diversify its customer base; otherwise, government cutbacks could continue to weigh down its top line in the future.

Lack of revenue growth isn’t BigBear’s only problem

It’s bad news for a growth stock to show no growth, and for its sales to actually decline on a year-over-year basis. But a more troubling issue I see is that BigBear’s gross profit margins are low for a software company. It reported a gross margin of $8.1 million last quarter, which was just 25% of its top line.

Many investors see BigBear as potentially being the next Palantir Technologies. But consider that Palantir’s gross margins are far stronger — about 80% of revenue, which enables the data analytics company to comfortably post a profit.

If BigBear isn’t generating enough gross profit, that will make it incredibly difficult for the company to get anywhere near breakeven. And it may also suggest that it is pricing its software solutions too low, perhaps for the sake of growing revenue. But without strong margins, revenue growth alone isn’t going to make BigBear a strong company to invest in.

BigBear has a lot of work to do before it becomes a good stock to own

For BigBear to be a good business to invest in, it needs to diversify its operations so that it isn’t so dependent on government spending. It also needs to improve its gross margins. Without those two things, it’s going to be extremely difficult for the company to consistently grow its top line and have any hope of becoming profitable in the foreseeable future.

Until that happens, I would suggest staying away from the stock as BigBear has been a highly risky and volatile investment to hang on to thus far, and I don’t think that’s going to change anytime soon.

BigBear.ai (BBAI 1.92%) stock was in roaring form on the stock market for much of the past year, rising by a whopping 337% as of this writing, despite even wilder swings in its share price. The past month, however, has been one that the company’s investors may wish they could forget — the stock lost 31% of its value during the period.

Its second-quarter results, which it released on Aug. 11, made matters worse. BigBear.ai didn’t just miss Wall Street’s expectations — it also trimmed its 2025 guidance, and the stock was hammered. Investors, however, should remember that BigBear.ai is operating in the artificial intelligence (AI) software market, which is on course to grow rapidly in the coming years.

So, should savvy investors treat this stock’s recent drop as a buying opportunity in anticipation of healthy gains over the next three years? 

Image source: Getty Images.

BigBear.ai’s end market is growing at an incredible pace

BigBear.ai’s AI-powered solutions enable its clients to analyze their data so that they can improve their decision-making ability, which can ultimately lead to improved operational efficiency and productivity. The company’s AI solutions are already being deployed in such varied areas as cybersecurity, digital identity management, computer vision, and predictive intelligence.

BigBear.ai points out that these AI tools are being used in industries such as border security, defense, travel and trade, supply chain, healthcare, and academics. The good part is that demand for the type of AI software platform that BigBear.ai provides is growing at a tremendous pace. Market research firm IDC expects this market to generate $153 billion in annual revenue in 2028, up from just $28 billion in 2023.

The bad news, however, is that BigBear.ai isn’t doing enough to make the most of this lucrative opportunity. Its revenue barely increased last year, and its updated 2025 guidance for revenue in the $125 million to $140 million range suggests that its top line will drop by between 12% and 21%. Meanwhile, competitor Palantir Technologies (PLTR 2.99%) has been making significant strides in the AI software platform market.

In the first half of 2025, Palantir’s revenue jumped by 44%. Its backlog grew at a faster pace than BigBear.ai’s. Palantir also ended the second quarter with a 65% spike in its remaining deal value (the total value of its unfulfilled contracts) to $7.1 billion. Meanwhile, BigBear.ai’s $380 million backlog at the end of Q2 represented a 43% increase from the year-ago period.

In short, Palantir is growing at a much faster pace than BigBear.ai, even though it is the bigger company. A major reason why that’s the case is that Palantir is successfully targeting commercial customers. The company started offering its Artificial Intelligence Platform (AIP) to commercial customers in April 2023, and it has been reaping the rewards ever since.

Palantir’s commercial revenue increased by an impressive 47% year over year in the second quarter, driven by an almost identical increase in the commercial customer count. BigBear.ai, on the other hand, relies on federal government contracts for the majority of its revenue. The unpredictability associated with government spending is the reason why BigBear.ai’s latest quarterly performance wasn’t up to the mark.

Lower-than-expected revenues from its Army contracts led to an 18% year-over-year revenue decline in Q2 and also forced management to lower its guidance.

It’s clear that BigBear.ai needs to take a leaf out of Palantir’s playbook and more aggressively pursue commercial opportunities. CEO Kevin McAleenan realizes this.  On the company’s latest conference call, he said:

Coming into the role as CEO earlier this year, it was clear to me that our pipeline was narrow and relied on a few large contracts. We have taken steps this year to deepen and broaden that pipeline with additional customers, more prime contract targets, larger opportunities, and expansion into new markets, including internationally.

However, McAleenan added that these changes will take time to materialize.

The next three years could be difficult for this AI software specialist

Analysts significantly reduced their 2025 revenue expectations for BigBear.ai following its latest quarterly report. Their consensus revenue estimate for 2026 has also dipped significantly.

BBAI Revenue Estimates for Current Fiscal Year data by YCharts.

The company was previously expected to deliver healthy revenue growth next year. Though it is still expected to produce a double-digit percentage jump in its top line, the forecast for 2027 points toward another slow year. As such, BigBear.ai stock may remain under pressure. However, investors would do well to keep this stock on their watch lists.

That’s because BigBear.ai’s strategy of widening its customer base and accessing new markets could pay off, allowing it to potentially outpace Wall Street’s expectations over the next three years. The stock is currently trading at 10 times sales, and it may become cheaper following its recent results. So if there are signs of a turnaround in BigBear.ai’s business, savvy investors could consider buying this AI stock at a cheap valuation before the company steps on the gas.