Will BigBear.ai Be Worth More Than Palantir 10 Years From Now?

Key Points

• BigBear.ai makes custom software, primarily for military clients and government-adjacent businesses.

• Its revenue declined in Q2.

• BigBear.ai's margin profile is unlike that of typical AI software companies.

• 10 stocks we like better than BigBear.ai ›

BigBear.ai (NYSE: BBAI) is one of the more popular small-cap artificial intelligence (AI) stocks on the market, and with a market cap of just $2.6 billion, it has a ton of room to grow.

The dream for any AI stock is to duplicate the performance of Palantir (NASDAQ: PLTR), which has delivered impressive revenue growth and outstanding stock price appreciation. Palantir now has a market cap topping $400 billion, so for BigBear.ai to surpass it would require incredible returns over the next decade.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Are such gains feasible, or is BigBear.ai too far behind to catch up?

Image source: Getty Images.

The U.S. military is becoming a key customer for BigBear.ai

BigBear.ai and Palantir operate in similar industries. Palantir sells AI-powered data analytics software that it originally developed to meet the needs of government clients. BigBear.ai also makes software that is primarily intended for government use, although it provides custom solutions rather than a software platform.

BigBear.ai's biggest contract is with the U.S. Army, developing its Global Force Information Management system. This system will ensure that the U.S. Army is "properly manned, equipped, trained, and resourced" for whatever the current mission is.

Recently, BigBear.ai announced that it will be assisting the U.S. Navy to improve coordination and decision-making capabilities during a major multinational training exercise. This could open up a pathway for the company to win another military contract, which it desperately needs.

BigBear.ai's margins leave a lot to be desired

Unlike most of its AI peers, BigBear.ai isn't growing. In Q2, its revenue declined 18% to $32.5 million. This is an obvious red flag. If the company can't put up respectable growth in the golden age of AI spending, when will it be able to?

Furthermore, because it isn't developing a software platform to base other products on, it must develop custom solutions for each client. This expensive process eats into BigBear.ai's gross margin. Most software companies (like Palantir) have gross margins in the 70% to 90% range. BigBear.ai's is in the 20% to 30% range. That limits the upside for its profits for the foreseeable future.

BBAI Gross Profit Margin data by YCharts.

That second red flag makes it even more difficult to compare BigBear.ai to a successful company like Palantir.

But even ignoring both of the current conditions, what would it take for BigBear.ai to reach Palantir's valuation level in a decade? Assuming that Palantir's price stays flat (which isn't a terrible assumption based on how expensive its valuation is already), BigBear.ai would need to achieve a compound annual growth rate of 166% for 10 years to reach its market cap.

That's a pretty unrealistic goal. Indeed, I doubt that BigBear.ai will ever reach Palantir's current size. I also think there are far better AI investment options available, as BigBear.ai's growth rate and low margins are cause for concern. If BigBear.ai can't grow its revenue base when interest in AI is this hot, there's no reason to think it will be able to deliver acceptable growth levels when demand moderates.

Should you invest $1,000 in BigBear.ai right now?

Before you buy stock in BigBear.ai, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and BigBear.ai wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $646,567!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,143,710!*

Now, it’s worth noting Stock Advisor’s total average return is 1,072% — a market-crushing outperformance compared to 191% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of September 29, 2025

Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.