BigBear.ai (BBAI -3.83%), a developer of artificial intelligence (AI) modules for edge networks, went public by merging with a special purpose acquisition company (SPAC) in December 2021. It started trading at $9.84, and rallied as high as $12.69 in April 2022. Then it plummeted to an all-time low of $0.63 that December after it broadly missed its own ambitious forecasts.
Prior to going public, BigBear.ai predicted its annual revenue would surge from $182 million in 2021 to $550 million in 2024. But in reality, its revenue rose from just $146 million in 2021 to $158 million in 2024 as it grappled with the bankruptcy of its top customer Virgin Orbit, competition from similar AI companies, and macro headwinds for the enterprise software market. CEO Reggie Brothers, who took the top job in 2020, stepped down in late 2022.
Image source: Getty Images.
But today, BigBear.ai's stock trades at about $5. A $1,000 investment in the stock at its all-time low would be worth about $8,000 today. Let's see why its stock recovered, review its biggest developments over the past year, and predict where it might be headed.
How did BigBear.ai impress the bulls again?
BigBear.ai develops three AI modules -- Observe, Orient, and Dominate -- to ingest data, identify trends, and predict future outcomes, respectively. These modules can be plugged into edge networks, which process the data between origin servers and end users. It also shares that data with bigger AI companies like Palantir Technologies.
Its recovery commenced under Brothers' successor Mandy Long, who orchestrated its all-stock acquisition of the AI vision company Pangiam last March. That move inorganically boosted its revenue and increased its exposure to the government sector through Pangiam's biometric identity tools. Pangiam CEO Kevin McAleenan was also previously the Acting Secretary of the Department of Homeland Security (DHS) during the first Trump administration.
So when McAleenan succeeded Long as BigBear.ai's CEO this January, its stock surged on hopes for new government contracts. It quickly secured new digital ID and biometrics initiatives for the DHS, a modernization project for the U.S. military's Orion Decision Support Platform (DSP), and new supply chain projects. In the second quarter of 2025, its backlog grew 43% year over year to $380 million. That swelling demand, along with the growing usage of Pangiam's biometric tools at airports, drove away the bears.
Why isn't BigBear.ai's stock setting fresh highs?
BigBear.ai's stock bounced back from its all-time lows, but some glaring weaknesses are holding it back. Its backlog is growing, but it will only slowly realize those revenues over the next few years. Many of its government contracts are also fixed-price contracts, which can't be renegotiated if its costs climb at a faster-than-expected rate.
In the second quarter of 2025, it stunned the bulls by reducing its full-year revenue guidance from 1% to 14% growth to a decline of 11% to 21%. Analysts now expect its revenue to drop 16% for the year. It attributed that guidance cut to some disruptions in its government contracts, particularly for its programs supporting the U.S. Army, as the federal government tries to consolidate its data infrastructure.
As its revenue declined, its gross margin plummeted 170 basis points year over year to 23.1% in the first six months of 2025. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin also dropped from negative 7.3% to negative 23%.
Its margins were squeezed by its slowing revenue growth, its dependence on lower-margin customized modules (as opposed to higher-margin recurring subscriptions), and rising research and development expenses. Analysts expect its adjusted EBITDA to stay negative for the foreseeable future.
As BigBear.ai wades through that red ink, it's diluting its investors with secondary offerings, the shares issued for its takeover of Pangiam, and high stock-based compensation expenses. Its number of outstanding shares has already increased 173% since its public debut, and that dilution will worsen as it racks up more losses.
With an enterprise value of $2.04 billion, BigBear.ai still looks expensive at 15 times this year's sales. That high valuation will prevent it from revisiting its all-time highs. That might be why its insiders sold nearly 53 times as many shares as they bought over the past 12 months.
Where will BigBear.ai's stock be in a year?
BigBear.ai's CEO appointment and new government contracts generated some fresh buzz for its stock, but it hasn't proven its business is sustainable yet. So for now, I expect its stock to either trade sideways or decline over the next 12 months as it tries to stabilize its wobbly business.
