BigBear.ai Faces Challenges Amid Government AI Spending Surge

The 'Big, Beautiful Bill' Is A Truly 'Transformative' Opportunity, Says BigBear.ai CEO: Touts Billions In New Federal Funding For AI, Defense - BigBear.ai Hldgs (NYSE:BBAI)

Enterprise AI startup, BigBear.ai Holdings Inc. BBAI, says that the "One Big, Beautiful Bill" represents a significant opportunity for the company. BBAI is getting crushed by bearish pressure. See what the numbers say here. Massive Federal Funding For AI, Border Tech, Defense During the company's second-quarter earnings call on Tuesday, CEO Kevin McAleenan described the controversial new legislation as providing "a transformative level of investment" across core areas where the company already operates. This includes $170 billion in supplemental funding to the Department of Homeland Security and $150 billion to the Department of Defense, with billions more for shipbuilding and other national security priorities. See Also: Trump Open To Scaled-Down Nvidia Blackwell AI Chip For China: Jensen Huang Is 'Coming To See Me Again About That' "This is not incremental funding for innovation. This is a transformative level of investment," McAleenan said, noting that the $70 billion earmarked for U.S. Customs and Border Protection, the $6.2 billion for border technology and $673 million for biometric exit programs are all areas tied to BigBear.ai's VeriScan biometric solutions. This funding is "directly in our lane," McAleenan says, adding that the company had anticipated all of these developments, and is now well-positioned "to capitalize on." McAleenan further notes that the bill includes a $16 billion military AI autonomy fund, which he says aligns with BigBear.ai's ConductorOS platform for unmanned aerial systems, along with $29 billion for domestic shipbuilding, in favor of its Shipyard AI supply chain technology. Stock Plunges After Hours, Following Q2 Results Despite the broad range of tailwinds aligning in its favor, investors were unimpressed with BigBear.ai's second-quarter results on Monday. The company reported $32.47 million in revenue, down from $39.78 million a year ago, and fell short of consensus estimates of $41.17 million. It also posted a massive loss of $0.71 per share, significantly worse than what analysts were expecting at $0.06 per share. As a result, the stock was down 0.70% on Monday, closing at $7.09 per share, but has since plunged 28.11% after hours, following the earnings announcement. BigBear.ai scores remarkably high on Momentum in Benzinga's Edge Stock Rankings, but does poorly on most other fronts, with an unfavorable price trend in the short, medium and long terms. Click here for deeper insights into the stock, its peers and competitors. Read More: Palantir CEO Warns US Could Lose AI Race Despite Record $1 Billion Quarter: Being Ahead Is the 'Danger Zone' Photo courtesy: PJ McDonnell / Shutterstock.com BBAIBigBear.ai Holdings Inc$5.10-28.1%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum98.69GrowthN/AQualityN/AValue16.09Price TrendShortMediumLongOverviewMarket News and Data brought to you by Benzinga APIs

Why BigBear.ai Stock Is Cratering Today | The Motley Fool

The defense-focused artificial intelligence company reported its second-quarter earnings Monday after market close, falling well short of Wall Street's expectations. BigBear reported a $0.71 loss per share on $32.5 million in revenue, missing analyst forecasts by a wide margin and representing an 18% year-over-year loss. Consensus estimates for the quarter had been for a $0.06 loss on $40.6 million in revenue. The company also lowered its full-year revenue guidance to between $125 million and $140 million, down significantly from the previous range of $160 million to $180 million. CEO Kevin McAleenan cited disruptions in the company's federal contracts as the primary cause, though he did point to future contract growth potential from newly authorized Department of Homeland Security (DHS) funding. While the big tech firms like Microsoft and Alphabet that power AI had blowout recent quarters, BigBear is the latest end-user AI company to show weakness. C3.ai also missed expectations by a mile, though Palantir still continues to fire on all cylinders. BigBear's sales trajectory is concerning, and its losses are growing. The company has a non-negligible amount of debt already and negative cash flows. Despite this, the stock still carries a hefty premium, granted not nearly as high as Palantir's, but still significant for its current sales and earnings trajectories. I would avoid the stock.

Should You Buy the Dip on BigBear.ai's Stock?

BigBear.ai (BBAI 5.39%) stock had a rough time following earnings. The stock plummeted nearly 20% following earnings and hasn't rebounded since then. Given how popular an artificial intelligence (AI) stock BigBear.ai was becoming, many investors are considering buying the dip. While this may seem like a smart idea, investors need to analyze the quarter and see if there was a solid reason for the stock to be down. If so, then it could be one to avoid, especially with so many other strong AI stock picks available. BigBear.ai isn't growing revenue BigBear.ai is focused on providing AI-powered solutions, primarily to the government, although it has other endeavors (like partnering with the United Arab Emirates) as well. If you look at Palantir, another government-focused AI company, you'll see its revenue is growing fast from both commercial and government clients, with commercial revenue rising 47% year over year and government revenue increasing even faster at 49%. BigBear.ai is not seeing the same success. In Q1, revenue fell 18% year over year to $32.5 million. With the massive demand for AI products and several companies rapidly growing their revenue, this is an obvious red flag. Perhaps even bigger news is that there was a disruption in its U.S. Army contract, which accounts for a large chunk of its revenue. This caused management to decrease its full-year revenue outlook, raising another red flag. BigBear.ai is not looking like a true winner in the AI space right now, and the struggles it's experiencing make it fairly obvious that competitors are providing much better products. It's not too late for BigBear.ai to turn it around, but there are other issues investors should be aware of. BigBear.ai's margins are low compared to its peers' Most software companies produce gross margins in the 70% to 80% range, with the best even getting to 90%. However, despite being a software company, BigBear.ai is nowhere near that level. BBAI Gross Profit Margin (Quarterly) data by YCharts The company has low gross profits because BigBear.ai isn't offering a standardized software; it's tailoring each product it delivers to its customers. This is quite expensive, and limits the potential net income it could generate someday if it turns profitable. Additionally, due to its low gross margin, the rule of thumb that most software companies trade between 10 and 20 times sales is useless. That rule of thumb assumes that higher gross margins will lead to higher profit margins, thus the increased valuation levels. At 10 times sales, BigBear.ai can be considered a very expensive stock, even after the fall following earnings. BBAI PS Ratio data by YCharts BigBear.ai isn't a stock I'd recommend anyone invest in. It has falling revenue at a time when business is unlikely to improve, and it's seeing problems with its primary contract. The company's margin structure is poor, and the stock is already expensive. The bull case for BigBear.ai's stock is essentially that AI is a rising tide that will lift all ships. However, that's not happening with BigBear.ai, and there are far too many impressive AI companies to invest in right now for anyone to waste time with an underperformer.

4 Words From Palantir CEO Alex Karp That BigBear.ai Investors Can't Ignore | The Motley Fool

Palantir CEO Alex Karp just delivered a curt, straightforward message to the company's rivals. Dr. Alex Karp isn't your typical corporate executive. He doesn't hold an MBA, and his public remarks often come in the form of unscripted, philosophical musings. Yet as CEO of data analytics powerhouse Palantir Technologies (PLTR -2.14%), Karp has led the company's transformation from a secretive government contractor into a leading force in artificial intelligence (AI) adoption across the enterprise software landscape. What many investors once viewed as a niche corridor, the intersection of defense operations and AI has swiftly become fertile ground supporting Palantir's generational run. The company has secured some of the Department of Defense's (DOD) most complex, mission-critical contracts, worth billions of dollars, cementing its role as a trusted partner in national security. Following Palantir's monster Q2 earnings report earlier this month, Karp's confidence was on full display. During an interview on financial news program CNBC, he delivered a blunt message to Palantir's rivals: "read 'em and weep." Let's unpack what Karp really meant and assess why investors in competing platforms such as BigBear.ai (BBAI 5.39%) can no longer afford to ignore Palantir's commanding lead in the AI defense arena. During the second quarter, Palantir's revenue surged 48% year over year to $1.0 billion. While that growth is impressive on its own, the finer details reveal just how deeply Palantir has embedded itself in the military operations pocket of the AI landscape. The company's government segment grew 49% year over year, slightly outpacing overall growth. Drilling down further, Palantir's U.S. government revenue rose by an even stronger 53% -- reaching $426 million in the quarter. This momentum is supported by a string of high-profile Pentagon deals. In March, Palantir partnered with defense contractors Northrop Grumman and L3Harris Technologies, along with autonomous systems specialist Anduril, in a $178 million U.S. Army deal to help build the Tactical Intelligence Targeting Access Node (TITAN) ground transportation system. Just months later, the Army extended its relationship with Palantir, awarding a $795 million extension to continue using the company's Maven Smart System(MSS) platform -- bringing the total deal value above $1.2 billion. More recently, Palantir further strengthened its public sector footprint with two additional contracts: a multiyear contract with the Army worth up to $10 billion, as well as a separate award to help develop a surveillance system for Immigration and Customs Enforcement (ICE). During BigBear.ai's second-quarter earnings call, CEO Kevin McAleenan acknowledged that the company has "seen disruptions in federal contracts from efficiency efforts this quarter, most notably in programs that support the U.S. Army, as they seek to consolidate and modernize their data architecture." Given the details outlined above, there's a strong possibility that the "disruptions" McAleenan referenced reflect Palantir winning these contracts. While BigBear.ai operates in some of the same broad fields as Palantir, such as AI analytics and machine learning, I think the comparison between the two companies is increasingly lopsided. Each new government contract awarded to Palantir deepens its competitive moat. The company's Foundry and Gotham platforms are evolving into a comprehensive, integrated ecosystem for the public sector -- supporting a range of mission-critical needs. Rather than true "network effects," Palantir is enjoying a cumulative competitive edge that's compounding with each deployment of its software -- ultimately broadening the company's footprint, strengthening its relationships, and making the cost of switching to competing platforms more costly. These dynamics have effectively given Palantir a mini-monopoly on certain pockets of public sector deal flow, beyond the capacities of traditional defense contractors specializing in manufacturing hardware or equipment. Karp's soundbite wasn't just swagger, nor was it merely aimed at short-sellers who have been betting against Palantir for years. It was a direct shot at every competing platform. The 2025 stock chart reflecting Palantir and BigBear.ai tells a very different story. Palantir has built steady momentum on the back of rising deal flow, translating directly into accelerating revenue and profitability. BigBear.ai, by contrast, has seen far more volatile price swings, with its moves often driven by hype and the hopeful narrative that it could one day become the "next Palantir." That outcome appears increasingly improbable. Each new government contract Palantir secures widens the gap between it and smaller rivals struggling to keep pace. For investors seeking exposure to AI's role in military operations, Palantir offers a proven track record over speculative counterparts such as BigBear.ai, whose traction remains more aspirational than tangible.

2 Artificial Intelligence (AI) Stocks the U.S. Government Is Actively Backing in 2025 | The Motley Fool

When it comes to artificial intelligence (AI) stocks, chances are investors' thoughts may turn to semiconductors, massive data centers, or cloud computing infrastructure. This is great news for chip powerhouses and hyperscalers like Nvidia, Advanced Micro Devices, Broadcom, Taiwan Semiconductor Manufacturing, Microsoft, Amazon, or Alphabet, but investors could be overlooking emerging opportunities beyond the usual suspects. Enterprise-grade software will become an increasingly vital layer atop the hardware stack. The commercial angle is to market AI-powered software to large corporations with complex needs spanning data analytics, logistics, human resources, cybersecurity, and more. But there is another opportunity outside of the private sector: how AI is redefining one of the largest and most sophisticated enterprises of all, the U.S. government. Earlier this year, Defense Secretary Pete Hegseth announced a plan to allocate more spending toward the Software Acquisition Pathway (SWP), a strategy first deployed in 2020. Its stated aim is to "provide for the efficient and effective acquisition, development, integration, and timely delivery of secure software." Let's explore how Palantir Technologies (PLTR -2.14%) and BigBear.ai (BBAI 5.14%) are capitalizing on AI's shift from hardware to software and how each company is approaching the opportunity with SWP. Palantir has been at the center of several notable deals with the federal government throughout 2025. In late May, it deepened its relationship with the Department of Defense (DOD) through a $795 million extension featuring its Maven Smart System (MSS). This brought the total value of the MSS program to $1.28 billion, making it a long-term revenue driver. More recently, the company won a deal with the Army reportedly worth up to $10 billion over the next 10 years. Palantir's wins extend beyond the U.S. military as well. The company is building the Immigration Lifecycle Operating System -- often referred to as ImmigrationOS -- for Immigration and Customs Enforcement (ICE). Signing multiyear billion-dollar deals provides Palantir with high revenue visibility, keeps its customer base sticky, and opens the door to upsell or cross-sell added services down the road. The ability to parlay its defense expertise into other government functions also expands Palantir's public sector footprint and reinforces the breadth of its capabilities -- solidifying its role as a ubiquitous AI backbone for the U.S. government. Another AI software developer that has signed deals with the U.S. government this year is BigBear.ai. In February, it won a contract with the DOD to design a system to assist national security decision-making by analyzing trends and patterns in foreign media. Shortly thereafter, the company won a $13.2 million deal spread over three and a half years to support the Joint Chiefs of Staff's force management and data analytics capabilities. In May, the company partnered with Hardy Dynamics to advance the Army's use of machine learning and AI for autonomous drones. Lastly, BigBear.ai has a deal with U.S. Customs and Border Protection to deploy its biometric AI infrastructure system, called Pangiam, at a dozen major airports across North America to help streamline arrivals and improve security protocols. Between the two stocks, I see Palantir as the clear choice. BigBear.ai has proved it can win meaningful government contracts, but its work is more niche-focused and smaller in scale compared to Palantir's multibillion-dollar deals across multiple platforms. In my view, BigBear.ai's popularity is largely with retail investors who are hoping that it becomes the "next Palantir." Smart investors know that hope is not a real strategy. Prudent valuation analysis -- and not speculation -- is required to know which stock is truly worth buying. Traditional approaches to valuation, such as the price-to-sales ratio (P/S), show that Palantir is the priciest software-as-a-service stock among the businesses in the chart above -- and its valuation expansion means that shares are becoming even more expensive as the stock continues to rally. Palantir is an impressive company that has proved it can deliver on crucial applications, but the stock is historically expensive. I think that investors are better off waiting for a more reasonable entry point and paying a more appropriate price down the road.

BigBear.ai Holdings Shares Plunge. Is This a Buying Opportunity or a Red Flag? | The Motley Fool

Share prices of BigBear.ai (BBAI -1.98%) plunged earlier this week after the analytics and systems integrator badly missed revenue and earnings expectations when it reported its second-quarter results. However, the stock is still trading up more than 300% over the past year, as of this writing. The shares initially staged a big rally in early February after the company announced a contract win with the Department of Defense's (DoD) Chief Digital and Artificial Intelligence Office to design a Virtual Anticipation Network (VANE) prototype. This platform will use artificial intelligence (AI) models to analyze news media coming from potential U.S. adversaries. After a pullback following this strong early-year run, the stock rallied again to start the summer. A combination of overall strong AI sentiment, along with a few notable announcements -- such as a new strategic partnership in the United Arab Emirates and its participation in Project Convergence-Capstone 5 (PC-C5) -- helped power the stock ahead. Let's take a closer look to see if the drop could be a buying opportunity, or if it's a warning to stay away. In Q2, BigBear.ai badly missed revenue expectations, as revenue sank 18% year over year to $32.5 million. That missed the $40.6 million analyst consensus, as compiled by S&P Global Market Intelligence. The company blamed the miss on the federal government's efforts to reduce costs, saying that this disrupted contracts it has with the United States Army, which has been working to modernize its data architecture. Note, however, that this doesn't appear to have affected Palantir Technologies, which reported great results and recently signed a $10 billion, 10-year contract with the U.S. Army that consolidated 75 contracts into a single contract. BigBear.ai said it "welcomes" this type of disruption, as it will lead to the Army using more software solutions to solve mission-critical problems. However, CEO Kevin McAleenan admitted that the company relies on too few large contracts and needs to broaden its customer base and the market it serves. How much of a true software company BigBear.ai actually is, though, is questionable, as can be seen in its low gross margins. In the quarter, its gross margin fell to 25% from 27.8% a year ago. Those are just not software or AI gross margins. Because the company's engineers and data scientists must co-locate and be on-premises for many of its government projects, it has structurally low gross margins. Gross margins are important, as the higher they are, the easier it is to turn revenue into profits. In comparison, Palantir had a gross margin of nearly 81% in Q2. On the profitability front, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was a loss of $8.7 million, compared to a loss of $3.7 million a year ago. The decline came from lower revenue, reduced gross margin, and higher research and development expenses. The company continued to burn cash in the quarter, but it took advantage of its high stock price to sell shares and solidify its balance sheet. It generated cash flow from operations of negative $3.9 million in the quarter and negative $7.1 million in the first half. However, after raising $293.4 million in proceeds from at-the-market (ATM) stock sales, it ended the quarter with $390.8 million in cash and equivalents and $103.1 million in debt. Looking ahead, BigBear.ai reduced its full-year revenue forecast to be between $125 million and $140 million, down from a prior outlook of $160 million to $180 million. That would be a decline from the $158.2 million in revenue the company saw in 2024. BigBear.ai is simply not a software company riding the AI wave. It doesn't have the gross margins or predictable revenue stream of a software-as-a-service (SaaS) company. It also hasn't seen a big revenue lift from AI. In fact, its revenue this year is set to come in at the lowest level ever since the stock debuted in December 2021 through a SPAC. While the stock has staged a big rally this year, its share count is also up nearly 50% in the past year. That's massive dilution. The company has done nothing to deserve the big rally it's seen over the past year, and I think the sell-off in the stock was actually pretty tame given its results and guidance. While some investors may want to hope that BigBear.ai can turn into the next Palantir, that is just highly unlikely. I think a lot more downside could be in store, and as such, I'd stay far away.