BigBear.ai (BBAI 4.93%), a developer of AI modules for edge networks, went public by merging with a special purpose acquisition company (SPAC) on Dec. 7, 2021. Its stock started trading at $9.84 the next day and closed at a record high of $12.69 on April 13, 2022.
Investors were initially impressed by the company's ambitious growth forecasts. In its pre-merger presentation, BigBear.ai claimed it could triple its revenue from $182 million in 2021 to $550 million in 2024. However, its revenue only rose from $146 million in 2021 to $158 million in 2024.
That anemic growth -- which it blamed on a difficult macro environment, competition from bigger AI companies, and the bankruptcy of its top customer Virgin Orbit -- drove away the bulls. That's why it trades at less than $4 today. Should investors buy it as a turnaround play?
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What happened to BigBear.ai after its SPAC merger?
BigBear.ai develops three AI modules (Observe, Orient, and Dominate) for ingesting data, identifying trends, and predicting potential outcomes. It plugs these modules into edge networks, which can intercept and process data faster than an organization's origin servers. It also shares its accumulated data with bigger data mining companies like Palantir.
BigBear.ai has been led by three different CEOs since its public debut. Reggie Brothers, who took over in 2020 and led it through its SPAC merger, resigned in October 2022 as the company broadly missed its original estimates. His successor, Mandy Long, reset the company's roadmap by reining in its spending and orchestrating an all-stock acquisition of the AI vision company Pangiam to grow its revenues.
Pangiam's co-founder and CEO Kevin McAleenan, who previously served as the acting secretary of the Department of Homeland Security during the first Trump administration, succeeded Long as BigBear.ai's new CEO this January. McAleenan's appointment sparked hopes of new government contracts and generated fresh buzz for BigBear.ai's stock again.
The actual growth rates have been dismal
BigBear.ai's revenue only rose 2% in 2024, with its acquisition of Pangiam (which closed in the first quarter) largely offsetting the declining revenues from its Air Force Engineering, Professional, and Administrative Support Services program. Budget cuts at the U.S. Department of Defense, macro headwinds, and intense competition exacerbated that pressure.
Meanwhile, bigger AI-driven data analytics companies like Palantir are growing at much faster rates. It's usually a red flag when an underdog is growing slower than the market leaders.
However, BigBear.ai's gross margin still expanded 240 basis points to 28.6% as its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved from negative $3.2 million to $2.4 million. Its acquisition of Pangiam, which generated higher margin revenues, and year-end accounting adjustments (to its fringe and true-up overhead costs) boosted its gross margin. Its adjusted EBITDA improved as it trimmed its expenses and pruned its workforce.
That stabilization was encouraging, but it lost a lot of momentum in the first quarter of 2025, as its revenue, gross margin, and adjusted EBITDA all declined sequentially. The company mainly blamed the slowdown on delays in new government contracts, even though it secured new government deals after McAleenan took the helm.
|
Metric |
Q1 2024 |
Q2 2024 |
Q3 2024 |
Q4 2024 |
Q1 2025 |
|---|---|---|---|---|---|
|
Revenue |
$33.12 million |
$39.78 million |
$41.51 million |
$43.83 million |
$34.76 million |
|
Gross margin |
21.1% |
27.8% |
25.9% |
37.4% |
21.3% |
|
Adjusted EBITDA |
($1.63 million) |
($3.68 million) |
$0.95 million |
$1.96 million |
($6.99 million) |
Data source: BigBear.ai.
It doesn't look like a bargain yet
For the full year, BigBear.ai expects its revenue to rise 1%-14% with an adjusted EBITDA in the "negative single digit millions." Analysts expect its revenue to rise 6% to $168 million with a negative adjusted EBITDA of $7 million.
With an enterprise value of $1.1 billion and limited catalysts on the horizon, the stock still doesn't look cheap at 6.5 times this year's sales. It's also more than doubled its number of outstanding shares since its debut with stock-based compensation, public offerings, and the conversion of its convertible debt. That dilution should continue for the foreseeable future.
That might be why BigBear.ai's insiders sold more than 30 times as many shares as they bought over the past 12 months. So for now, investors should steer clear of BigBear.ai and stick with more reliable AI stocks in this volatile market.
