BigBear.ai (NYSE:BBAI), a provider of AI solutions focused on national security, offers a high-risk, high-reward investment opportunity. While the company enjoys notable contract victories and a strong position in the defense industry, it is also hindered by ongoing financial difficulties and significant stock price fluctuations.
The stock performance of BBAI has been tumultuous. It skyrocketed seven-fold from below $1.50 in July of the previous year to over $10 in early 2025, driven by excitement for the AI market. However, it later fell to its current value of approximately $5, which reflects both a general market correction and concerns regarding the company’s operational performance. That said, if you are looking for upside potential with reduced volatility compared to individual stocks, the Trefis High Quality portfolio offers an alternative – having outperformed the S&P 500 and achieved returns of over 91% since its launch. Additionally, see –QuantumScape: What’s Happening With QS Stock?
Stagnant Revenue and Deepening Losses
Despite its promising market, the financial path of BBAI shows troubling stagnation. BigBear.ai’s Revenue in 2024 reached $158 million, marking a mere 2% rise from $155 million in 2023. This slight growth continues a multi-year trend, as revenues in 2022 were also close to $155 million. To complicate matters, losses grew significantly to $296 million in 2024, representing an astounding 318% increase from the prior year.
While BigBear.ai did exhibit some quarterly progress—with Q4 2024 revenue climbing 8% to $44 million and Q1 2025 revenue jumping 5% to $35 million, largely driven by awards from the Department of Homeland Security and Digital Identity—this seems inadequate to counteract the broader trend of underperformance. The company even fell short of its revised 2024 sales goal of $165 million, underscoring ongoing operational difficulties despite new contract awards.
Positive Catalysts on the Horizon
In spite of its financial challenges, BigBear.ai has several notable positive factors:
- Growing Backlog: The company’s backlog increased 2.5 times from $168 million at the end of 2023 to $385 million by the end of March 2025. This significant rise offers essential revenue visibility, even amid execution difficulties.
- Key Government Contracts: BBAI has secured multiple major government contracts in 2025, including a 3.5-year, $13.2 million sole-source Department of Defense (DoD) contract to upgrade a vital force management system.
- Strategic Market Position: BigBear.ai operates in crucial AI applications related to national security, developing solutions such as facial recognition systems for airports and AI-augmented shipbuilding software for the U.S. Navy. The current elevated geopolitical climate strongly favors increased defense AI investments, generating a supportive market environment for the company.
Significant Risks to Consider
Nonetheless, investors must consider these positives against significant risks:
- Execution Concerns: The firm’s ongoing failure to achieve substantial revenue growth, even in a favorable AI and defense spending climate, raises fundamental doubts about its execution capabilities and competitiveness in the market.
- Reliance on Federal Contracts: BBAI’s strong dependence on federal contracts exposes it to potential vulnerabilities from defense budget cuts or policy changes. Any decrease in government AI expenditures may greatly affect the company’s financial results.
- Extreme Stock Volatility: The stock exhibits a heightened sensitivity to overall market conditions. For instance, during the inflation shock of 2022, BBAI’s shares dropped 95% while the S&P 500 decreased by 25%. More recently, its stock declined by over 75% when the S&P fell by 19% due to concerns over tariffs. See – Buy or Sell BigBear.ai stock.
- Valuation Discrepancy: With minimal revenue growth and considerable losses, BBAI’s current valuation appears disconnected from its operational realities. It largely relies on overall sector momentum and geopolitical tailwinds. At its current price of $5, BBAI shares are trading at 5.7 times trailing revenues, compared to 3.1 times for the broader S&P 500 index and its own four-year average P/S ratio of 3.6 times.
Investment Outlook
In summary, BigBear.ai represents a high-risk, high-reward opportunity in defense AI spending. While the company benefits from robust backlog growth and operates in strategically significant sectors, its ongoing revenue stagnation, escalating losses, and extreme stock volatility make it unsuitable for risk-averse investors. The stock’s attractiveness largely depends on the continuation of geopolitical tensions that stimulate defense AI investment and, crucially, the firm’s ability to convert its contract awards into sustainable and substantial revenue growth. Now, we apply a risk assessment framework while constructing Trefis High Quality (HQ) Portfolio which, with a selection of 30 stocks, has a history of comfortably outperforming the S&P 500 over the past 4 years. Why is that? As a collective, HQ Portfolio stocks delivered better returns with less risk than the benchmark index; less of a roller-coaster experience, as evidenced in HQ Portfolio performance metrics.