2025 ended up being a wild ride for stockholders of artificial intelligence (AI) company BigBear.ai (BBAI 2.54%). The share price of the security- and defense-focused AI specialist plunged more than 75% in March and experienced a lot of volatility in the months since then.
NYSE: BBAI
Key Data Points
2026 has been good for the stock so far, with shares trading up 11.8% year to date, but it still has a long way to go before it regains its 2025 highs. Should you buy stock in BigBear.ai right now?
A different kind of AI
Even though it has "AI" in its name, BigBear.ai isn't focused on developing a large language model (LLM) like OpenAI's ChatGPT or Anthropic's Claude. Instead, BigBear.ai has developed AI for use in very specific, very niche applications for the defense and security industry.
Image source: Getty Images.
One of BigBear.ai's biggest products is its Trueface facial-recognition software platform, which is currently deployed at U.S. airports and other points of entry. The system takes photos and videos in real time and matches them against an existing image gallery -- for example, criminal mugshots -- in as little as 2 milliseconds. The company claims Trueface's accuracy is better than 99.1% when the database consists of 12 million images and even higher for smaller databases.
BigBear.ai also provides secure AI-powered edge computing services of various types, including the ORION decision support platform used by the U.S. Department of Defense's Joint Planning and Execution Community (JPEC). According to the company, ORION is "an advanced operational planning and readiness tool designed to enhance decision-making through predictive analytics, real-time data integration, and AI-driven insights." This business line seems similar to the offerings of fellow AI-powered defense contractor Palantir Technologies (PLTR +1.25%).
Growth by acquisition
Unlike Palantir, BigBear.ai hasn't been growing its revenue or net income over the last three years. Part of this may be due to the niche nature of its products.
Facial recognition software is a must at border checkpoints and airports, but at most companies, a simple ID card scanner will do the trick for a lot less money. Likewise, when a remote tank convoy needs to verify its coordinates, a secure platform for edge communications is critical. But most of us will never find ourselves in that situation.
Image source: Getty Images.
BigBear.ai has made two recent acquisitions to help juice revenue growth. In December, it finalized its $250 million acquisition of Ask Sage, a generative AI platform specifically built for secure deployments. The platform offers agentic AI in highly regulated environments. Two weeks ago, BigBear.ai announced it had acquired unspecified assets from CargoSeer Ltd., a company that provides AI-powered cargo-scanning enhancement and trade-risk management software for customs enforcement missions, for an unspecified amount.
Management is clearly interested in making further acquisitions but just ran into a big hurdle that impacts whether investors should buy BigBear.ai right now.
Kicking the can
On Jan. 22, BigBear.ai's management planned to hold a proxy vote to amend the company's Certificate of Incorporation to allow it to issue more shares. It had already issued 436.6 million shares to fund its acquisitions and debt reduction. That was getting very close to BigBear.ai's existing 500 million share cap. The amendment would allow the company to issue another 500 million shares for a potential total of 1 billion.
Image source: Getty Images.
CEO Kevin McAleenan insisted in a letter to shareholders that the ability to more than double the existing share count of the company was necessary in order to do things like "make important acquisitions, fund product development and strengthen our balance sheet."
Of course, any additional share issuance would have diluted the positions of existing shareholders, and it looks as though they may not have been pleased. The approval meeting was abruptly changed to Feb. 18, and internet proxy voting was reopened until the 17th, with no further explanation. That likely means management was worried it didn't have the votes to approve the amendment.
While this temporary reprieve is good for shareholders from a dilution standpoint, it's very problematic for a company that intends to grow by acquisition. Buying shares of BigBear.ai right now seems like a particularly risky move given the uncertainty surrounding the amendment vote. Investors would be wise to steer clear for now.
