BigBear.ai (BBAI +0.91%) hasn't impressed too many investors since its public debut. The artificial intelligence (AI) software company went public by merging with a special purpose acquisition company (SPAC) on Dec. 7, 2021. Its stock opened at $9.84 on its first day, but it now trades at less than $4.
Like many other SPAC-backed start-ups, BigBear.ai overpromised and underdelivered. In the company's pre-merger presentation, it claimed it would triple annual revenue from $182 million in 2021 to $550 million in 2024. But from 2021 to 2024, its revenue only rose from $146 million to $158 million in 2024, while its net loss more than doubled from $124 million to $257 million.
Those numbers were grim, but could this unloved AI stock still bounce back over the next five years?
Image source: Getty Images.
Why did BigBear.ai miss its own expectations?
BigBear.ai provides three main AI modules (Observe, Orient, and Dominate) that ingest data, identify trends, and predict future outcomes. It plugs its modules into edge networks that intercept and process data before it reaches an organization's origin servers. It also builds customized apps for certain markets and shares its data with bigger AI-driven data mining firms, like Palantir.
BigBear.ai blamed its slowdown on the bankruptcy of its major customer Virgin Orbit in 2023, competition from bigger cloud and AI companies, macro headwinds for software spending, and its dependence on fixed-price contracts, which restrict the company from adjusting prices if its costs keep rising.
|
2021 |
2022 |
2023 |
2024 | |
|---|---|---|---|---|
|
Revenue |
$145.6 million |
$155.0 million |
$155.2 million |
$158.2 million |
|
Gross Margin |
23% |
27.7% |
26.2% |
28.6% |
|
Adjusted EBITDA |
$4.9 million |
($17.1 million) |
($3.2 million) |
($2.4 million) |
Data source: BigBear.ai. EBITDA = earnings before interest, taxes, depreciation, and amortization.
BigBear.ai was led by three different CEOs in as many years. Reggie Brothers, who oversaw its public debut, resigned in 2022 and handed the reins to Mandy Long, a former IBM executive. Long focused on cutting costs and expanding the company's platform through its all-stock acquisition of the AI vision firm Pangiam in early 2024.
This January, Pangiam's co-founder and CEO Kevin McAleenan, who had previously served as the acting secretary of the Department of Homeland Security (DHS) during the first Trump administration, succeeded Long as BigBear.ai's new CEO.
NYSE: BBAI
Key Data Points
What are BigBear.ai's potential catalysts?
Under Long and McAleenan, BigBear.ai tightened its relationship with the U.S. goverment with more Department of Defense, DHS, and U.S. Navy contracts. Its modules are now being used in the Orion Joint Staff, SeaPort Next-Gen, and foreign media analysis programs. They're also being used by Austral USA to produce submarines and Hardy Dynamics to develop drone swarms, and the company has been working with Easy Lease and Vigilix to serve the mobility and industrial sectors in the UAE.
BigBear.ai's backlog swelled to nearly $385 million at the end of the first quarter of 2025, and the company should secure more government and commercial deals as its brand visibility improves. As it gains new contracts, BigBear.ai will start deploying some of its new custom AI platforms -- including Pangiam's security tools, ProModel, ConductorOS, and Shipyard.ai -- and monetize them more aggressively. Some of its newer AI platforms, including veriScan and Trueface, are already boosting revenue.
Where will BigBear.ai's stock be in five years?
From 2024 to 2026, analysts expect BigBear.ai's revenue to have a compound annual growth rate (CAGR) of 9% as its adjusted EBITDA turns positive in the final year. Those growth rates aren't that impressive, especially when bigger AI companies like Palantir are growing faster and posting bigger profits.
However, the figures indicate that BigBear.ai's business won't grind to a halt anytime soon. And with a market cap of $1.1 billion, the company's stock doesn't look like a screaming bargain at 6.5 times this year's sales.
Assuming BigBear.ai matches Wall Street's expectations, grows its revenue at a CAGR of 10% over the next four years, and trades at a reasonable five times forward sales by the start of 2030, its market cap might rise more than 25% to $1.4 billion over the next five years. That would still likely underperform the S&P 500 index, which has delivered an average annual return of 10% ever since its inception.
BigBear.ai would also need to play all of its cards right to achieve that gain -- and a lot of macro and competitive challenges could derail its growth and prevent it from securing fresh contracts. For now, I think BigBear.ai's weaknesses still overwhelm its strengths -- and I'll need to see more green shoots appear before I pull the trigger.
