Since the seminal arrival of OpenAI's ChatGPT in 2022, governments and organizations around the globe have rushed to adopt artificial intelligence (AI). This has been a boon for AI-focused businesses, such as BigBear.ai (BBAI +0.72%).
BigBear.ai stock is up over 60% in 2025 through the week ending Oct. 17. Even so, shares are below the 52-week high of $10.36 reached in February. Does this signal a buy opportunity for the AI stock?
BigBear.ai's business hit road bumps this year, so the answer isn't straightforward. Seeing if this AI stock is a smart investment requires digging into what's going on with BigBear.ai right now.
Image source: Getty Images.
The hit to BigBear.ai's sales
BigBear.ai specializes in artificial intelligence solutions for national security and infrastructure. For that reason, most of its revenue comes from the U.S. government.
This position should be an advantage, given President Trump's assertion that AI leadership "is of paramount importance to maintaining the economic and national security of the United States."
However, the Trump Administration also pursued spending cuts in what it calls "wasteful spending of taxpayer dollars." This resulted in government contracts being pared back during the second quarter to the tune of several billion dollars.
As a result, BigBear.ai sales fell 18% year over year to $32.5 million in Q2. That's not all. The government cutbacks caused the company to reduce its 2025 revenue to a range of $125 to $140 million, a double-digit drop from the $158.2 million earned in 2024.
In the first half of 2025, BigBear.ai's sales came in at $67.2 million, down from $72.9 million in 2024. A small consolation is that the company is on track to meet the revised full-year revenue outlook.
NYSE: BBAI
Key Data Points
Is BigBear.ai poised to bounce back?
Since the Q2 setback, BigBear.ai has had a streak of wins. In August, the company announced a deal to provide AI-powered security services for cargo passing through the Panama Canal. In September, its biometric solutions were adopted by the Nashville International Airport, adding to a growing list of locations using BigBear.ai for airport security.
Then in October, the company announced a partnership with Tsecond to boost BigBear.ai's edge computing capabilities. This collaboration allows BigBear.ai's battlefield AI tech to function without relying on an internet connection. As the company states, the solution enables "tactical teams to make faster, more informed decisions" in real time.
These successes are encouraging signs. However, how much they help sales bounce back from BigBear.ai's challenging second quarter won't be clear until its Q3 earnings report is released on Nov. 10.
The company also benefits from record high cash of $391 million on its Q2 balance sheet compared to debt of $143 million. This puts BigBear.ai in a net positive cash position for the first time.
However, BigBear.ai doesn't operate a profitable business. Through the first half of 2025, its operating loss stood at $111.5 million.
To buy or not to buy BigBear.ai stock
One factor that could serve as a tailwind to BigBear.ai's business is the passage of the One Big Beautiful Bill Act, which provides a historic level of funding for the U.S. Department of Homeland Security (DHS). The DHS is one of BigBear.ai's customers, and the company's CEO, Kevin McAleenan, ran the agency during President Trump's first term.
These factors and its wins over the past few months helped to buoy BigBear.ai's stock. As a result, its share price valuation is elevated.
You can see this by taking a look at its forward price-to-sales (P/S) ratio, which measures how much investors are prepared to pay for every dollar of projected revenue over the next 12 months, and comparing it to another AI company providing solutions to the federal government, C3.ai.
Data by YCharts.
The chart shows BigBear.ai's P/S ratio was below its competitor earlier this year, but has since risen far higher, making C3.ai stock the better value right now. In fact, given how high BigBear.ai's forward sales multiple has risen recently, the stock is looking pricey.
A comeback story could be imminent for the company after a tough Q2, but this looks as if it's priced into the stock already. Consequently, although BigBear.ai shows promise as an AI investment, the ideal approach is to wait for its Q3 results for signs of revenue recovery before deciding to buy.
