BigBear.ai (BBAI 2.54%) has lately been popular among investors looking to buy artificial intelligence (AI) software stocks at reasonable valuations. That's not too surprising, as the company seems to be following Palantir Technologies' (PLTR +1.25%) playbook in the generative AI software market.
Palantir initially made its name by supplying analytics solutions to U.S. intelligence agencies and the Defense Department, and its software platforms are still being used by the U.S. Army and the Air Force, as well as Homeland Security, among others. But nearly three years ago, it launched its Artificial Intelligence Platform (AIP) for both commercial and government customers, and since then, its growth has surged, and the stock price has exploded.
As a result, it's now trading at exorbitant valuations. Given that BigBear.ai is also targeting both government and commercial customers with a generative AI software platform, it is easy to understand why it, too, has caught investors' attention. The stock has appreciated by 142% over the past three years.
However, a closer look at their respective businesses suggests that Palantir is the better long-term bet of the two for investors.
Image source: Getty Images.
The commercial segment has bolstered Palantir's growth
Palantir's pivot to seek more of its growth among corporate customers is reaping rich rewards. In the third quarter of 2025, its commercial revenue spiked by 73% year over year to $548 million. Its government revenue rose by 55%.
NASDAQ: PLTR
Key Data Points
Overall, its top line increased by 63% to $1.18 billion, 46% of which came from commercial customers. It won't be surprising to see the commercial business move the needle more for Palantir in the future. That's because its commercial customer count increased by 49% year over year in the quarter to 742.
The 50 new commercial customers that Palantir added during the quarter are likely to drive stronger growth for the company. That's because a new customer that uses AIP to integrate generative AI solutions into its operations usually goes on to expand its adoption of the platform.
That's not surprising considering the productivity gains that AIP is known to deliver. It is worth noting that Palantir has been ranked as the top vendor of AI software platforms by third-party market researchers. Also, the expansion in commercial customers' use of its AI software has led to a nice bump in its average contract size.
For example, Palantir signed 204 deals worth $1 million or more in Q3 2025, nearly double the number it inked in the year-ago period. Even better, the number of deals valued at $10 million or more jumped more than threefold. Its ability to generate growing revenues from its existing customers is the reason its earnings jumped 110% in Q3.
Moreover, the company's growth has also been accelerating due to the addition of new commercial customers.
BigBear.ai, however, has been unable to tap the commercial market so far, and that's turning out to be a major headwind for the company.
BigBear.ai's stock is cheaper than Palantir's, but for good reason
BigBear.ai stock fell hard in August after the company missed Wall Street's expectations for the second quarter and lowered its full-year guidance. With more than a month before it reveals its Q4 results, management's guidance for 2025 is for revenue in the range of $125 million to $140 million, which would be a decline from its 2024 sales of $158 million.
The biggest driver of BigBear.ai's poor financial performance is its reliance on government contracts for the majority of its revenue, as the company noted in its quarterly filing. So, changes in government budgets or the timing of the federal contracts can impact BigBear.ai's performance.
This is where the investment thesis for Palantir pulls ahead, as it has successfully and aggressively diversified into the commercial market. Moreover, its position as the No. 1 player in AI software platforms puts it in a much better position to capitalize on the long-term opportunity in this space.
Precedence Research estimates that the AI software platform market could grow from $26 billion last year to $88 billion in 2034, a compound annual growth rate (CAGR) of 14%. Palantir is growing at a significantly faster pace than the market and gaining market share. BigBear.ai, however, is losing ground. That's why investors should consider skipping the stock, even though it trades at just 12.6 times sales, a big discount to Palantir's sales multiple of 111.
Palantir's expensive valuation appears justified, as it seems poised to become a much bigger player in the AI software platform market in the long run, which could translate into healthy gains for its shareholders.
