While computing needs sophisticated hardware and solid infrastructure to support it, it's all just a pile of circuits and wiring without the software to make it operate. Leading software companies can be massively profitable investments, as they develop products that companies need.
Two software companies working in the government space are Palantir Technologies (PLTR +1.77%) and BigBear.ai (BBAI 2.17%). But while Palantir has enjoyed a massive growth window, BigBear.ai is struggling to gain traction.
Which of these is the better investment for the next several years?
Image source: Getty Images.
Palantir's AIP appears unstoppable
Palantir has been a government contractor for years, providing data coordination and analysis to the U.S. government, including analysis that led to the capture of the terrorist Osama bin Laden. The company eventually expanded into commercial data analysis, and it came into its own nearly three years ago, when it launched its revolutionary Artificial Intelligence Platform (AIP).
AIP allows its customers to integrate large language models into its massively powerful platforms, which makes it much easier for users to create detailed prompts with minimal training. Palantir launched a series of "AIP Bootcamps" to introduce the platforms to an expanded client base, emphasizing adoption by commercial clients.
The results have been astounding. Revenue in the fourth quarter was up 70% from a year ago to $1.40 billion. And for the full year, Palantir saw 56% revenue growth, reaching $4.475 billion.
Net income for the full year was $1.62 billion, up 36% from a year ago, and free cash flow was $2.27 billion, up from less than $800 million in 2024.
In the fourth quarter alone, Palantir reported closing 180 deals -- roughly two per day -- valued at more than $1 million each. Eighty-four of those deals were valued at least $5 million, and 61 had a value of $10 million or more.
Analysts at Yahoo! Finance expect Palantir to see another 75% jump in revenue this year, to $7.25 billion. The average price target for Palantir stock is nearly $190, which represents a potential 44% run-up in stock price.
NASDAQ: PLTR
Key Data Points
BigBear.ai operates at a much smaller scale
BigBear.ai is also a software provider. But the major difference between the two companies is that Palantir's Foundry and Gotham platforms are relatively versatile, usable across a variety of businesses and government agencies.
The stock dropped last year, as lower volume in its U.S. Army program led to a decline in revenue. The share price is down 56% in the last 12 months, including a 25% drop since the beginning of the year.
BigBear.ai also uses artificial intelligence (AI) in its software -- its ConductorOS platform connects to sensors, unmanned vehicles, and field computers and works with cloud services to enable users to make real-time decisions. It also purchased AskSage at the end of 2025, a generative AI platform that is designed for national security agencies and military units.
NYSE: BBAI
Key Data Points
The consensus estimate from analysts monitored by Yahoo! Finance puts BigBear.ai revenue at $164.3 million next year -- a projected increase of 22%, but a far cry from Palantir's sales.
Palantir is the better choice
While Palantir's extreme valuation -- a forward P/E ratio of 110 and a price-to-sales ratio of 75 -- is eye-watering, BigBear.ai is a penny stock at this point, subject to extreme volatility and potential risk. I would rather have a stock with a solid growth curve, even at an extreme valuation, than one that is barely treading water.
