The rapid growth in the generative artificial intelligence (AI) software market has driven BigBear.ai Holdings, Inc.’s BBAI shares to soar a staggering 281% over the past year. But, recently, BigBear.ai’s shares have faced volatility, raising doubts about whether it can become the next Palantir Technologies Inc. PLTR, another prominent player in the AI software space. Let’s explore and evaluate BigBear.ai’s investment potential.
What’s Behind the Decline in BigBear.ai Stock Since August?
Shares of BigBear.ai have fallen 6.1% since the beginning of last month. Disappointing second-quarter results negatively affected BigBear.ai’s share price. Revenues for the second quarter were $32.5 million, an 18% drop from $39.8 million in the same quarter last year.
What’s concerning is that it’s not just a one-time issue; BigBear.ai’s revenue growth has slowed year over year for the past four quarters, and the worst was in the most recent quarter. Revenues decreased because of reduced volumes in certain Army programs.
To make things worse, BigBear.ai’s management now expects revenues for full-year 2025 to be between $125 million and $140 million, lower than the earlier estimate of $160 million and $180 million. The full-year sales estimate was lowered because of postponed contracts from the U.S. government.
The decline in sales guidance leads us to believe that BigBear.ai’s products may not be appealing to the U.S. government, including the Army. BigBear.ai also reported a net loss of $228.6 million in the second quarter, way more than a net loss of $14.4 million in the same quarter a year ago.
However, BigBear.ai reported a substantial backlog of $380 million as of June 30, 2025. Can this be a game-changer? Certainly not in the near term! This is because the funded portion of the backlog, those that are authorized and secured, accounts for just over 4% of the total backlog, as mentioned in BigBear.ai’s SEC filings. Also, the majority of the contracts are from the federal government, which may lead to prolonged approval procedures.
Backlog Information (in thousands)
Image Source: BigBear.ai
Does BigBear.ai Stock Have the Potential to Be the Next Palantir?
While BigBear.ai struggled to convert some of the federal government and Army contracts into revenues in the second quarter, Palantir gave a strong performance. The latter saw its U.S. business revenues grow by 68% year over year in the second quarter, with U.S. government revenues rising 53%. Even more impressive was Palantir’s U.S. commercial revenue growth, which surged 93% year over year.
Palantir was able to secure 157 deals worth at least $1 million in the reported quarter, and its customer base grew by 43% year over year. This indicates that Palantir’s AI solutions, particularly its Artificial Intelligence Platform (AIP), have gained significant popularity with its clients.
Palantir also raised its full-year 2025 revenue forecast to $4.142-$4.150 billion, and expects net income to improve each quarter this year. This is solely because Palantir is confident in gaining business from its existing clients. Therefore, it’s premature to determine whether BigBear.ai can match Palantir’s growth trajectory in the near future.
Despite Odds, Is BigBear.ai Stock a Buy?
BigBear.ai’s dependence on government contracts is hindering its revenue growth, and its backlog doesn’t assure future expansion. BigBear.ai has struggled to build a customer base at a commendable pace, making it a riskier investment for now, despite trading at a much lower forward sales multiple than Palantir. BigBear.ai’s forward price-to-sales (P/S) ratio stands at 15.44, while Palantir’s is significantly higher at 96.52.
Image Source: Zacks Investment Research
Nonetheless, BigBear.ai’s recent launch of Enhanced Passenger Processing to improve international arrivals at the Nashville International Airport, along with the continuous rise in AI software spending, should encourage stakeholders to stay invested in BigBear.ai stock. Fueled by the new contract, BigBear.ai’s shares have begun to gain momentum in the last couple of trading sessions. For now, BigBear.ai stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Looking for a place to start? Check out Best AI Stocks to Buy for our picks and in-depth industry guide.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
