As their names suggest, BigBear.ai (BBAI +5.08%) and SoundHound AI (SOUN +1.90%) are two companies trying to capitalize on the growing demand for artificial intelligence (AI) applications.
However, their fortunes on the stock market have been quite contrasting in 2025. While BigBear.ai's stock price has jumped an impressive 47% as of this writing, SoundHound has lost more than 21% of its value. Let's look at the reasons why one of these AI stocks has made investors richer this year and the other one has struggled.
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BigBear.ai stock may struggle to deliver more gains
BigBear.ai provides AI software solutions to help improve the decision-making processes of both commercial and government customers. It applies AI and machine learning (ML) tools to clients' data for applications such as predictive analytics, threat detection, facial recognition, and biometrics, among others.
NYSE: BBAI
Key Data Points
Though the company points out that it is present in multiple areas such as defense, intelligence, border security, travel, hospitality, manufacturing, and supply chain, the bulk of its revenue comes from government contracts. The similarity that BigBear.ai's business has to that of Palantir's explains why investors have been buying this stock hand over fist.
But then, a closer look will tell us that BigBear.ai's stock price surge isn't justified by its poor financial performance. The company reported an 18% year-over-year decline in its revenue in Q2 to just under $40 million. Management attributed this sharp drop to "lower volume on certain Army programs," which tells us that its reliance on federal contracts for a big chunk of its revenue isn't paying off.
Moreover, BigBear.ai's margins shrank, and its losses increased on a year-over-year basis. Meanwhile, Palantir is enjoying outstanding growth in its business by attracting both commercial and government customers. This clearly suggests that BigBear.ai isn't finding much traction in the fast-growing AI software market.
Additionally, the company's revenue backlog indicates that it doesn't have much visibility going forward as well. That's because only a small portion of its backlog is funded. Almost 95% of the $380 million backlog it reported at the end of Q2 is either unfunded or unexercised, which means it will only be recognized as actual revenue if its customers decide to buy its solutions.
We have already seen that BigBear.ai struggled last quarter thanks to lower demand from a key government customer, which also forced it to lower its 2025 guidance. In fact, BigBear.ai's top line is set to drop by double-digit percentages this year, suggesting that it may find it difficult to deliver more upside to investors, especially considering that its price-to-sales ratio of 12 is on the expensive side.
SoundHound AI's drop in 2025 doesn't seem justified
While Bigbear.ai is finding it difficult to grow its business despite operating in a lucrative market, SoundHound AI isn't facing any such problem. The company's revenue in the second quarter was up by a whopping 217% from the year-ago period to $43 million.
The good part is that SoundHound AI's growth trajectory has been picking up in recent quarters.
Data by YCharts.
The pick-up in the company's growth isn't surprising, considering that it has been quick to build a solid customer base through its product development moves and acquisitions. SoundHound AI's voice AI solutions are used by customers in the automotive, hospitality, restaurant, financial services, retail, and healthcare industries.
What's more, it was sitting on a much bigger potential revenue backlog of $1.2 billion at the end of 2024. The fact that it has been growing at an outstanding pace clearly tells us that it has been successfully converting that massive backlog into revenue. That's also the reason why the company has raised its revenue guidance for 2025. Its top line is on track to double this year to $169 million, which is the midpoint of its guidance range.
Another thing worth noting is that SoundHound is growing at a faster pace than the 23% annual growth rate of the conversational AI market, which means it's winning a bigger share of this lucrative space that's expected to generate over $79 billion in annual revenue by 2033.
As a result, there is a good chance that SoundHound will be able to sustain its remarkable growth rate in the long run and eventually become a much bigger company. That's why investors would do well to buy it following its slide this year. Of course, the stock is expensive right now at 47 times sales, but that seems justified, considering how fast it is growing and its solid prospects.
As such, buying SoundHound AI over BigBear.ai seems like the smart thing to do for anyone looking to choose from one of these two AI stocks right now.
