Is BigBear.ai Stock a Buy Now?

BigBear.ai (NYSE: BBAI), a developer of artificial intelligence (AI) modules, went public by merging with a special purpose acquisition company (SPAC) four years ago. Its stock opened at $9.84, went through some wild swings, but now trades at less than $7.

Like many other SPAC-backed start-ups, BigBear.ai overpromised and underdelivered. In a pre-merger presentation, it predicted its annual revenue would more than triple from $182 million in 2021 to $550 million in 2024. But in reality, its revenue only rose from $146 million in 2021 to $158 million in 2024 as it dealt with the bankruptcy of its top customer Virgin Orbit, faced stiff competition from other AI companies, and weathered rough macro headwinds.

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BigBear.ai has also been led by three CEOs since its public debut. Reggie Brothers, who took the helm in 2020, stepped down in late 2022. He was succeeded by Mandy Long, a former IBM (NYSE: IBM) executive who mainly focused on cutting costs and orchestrating its all-stock takeover of the AI vision firm Pangiam to expand its ecosystem and boost its revenues. Pangiam's CEO, Kevin McAleenan, succeeded Long as BigBear.ai's CEO in early 2025.

McAleenan previously served as the acting secretary of the Department of Homeland Security (DHS) during the first Trump Administration, and the company gained some fresh government contracts after he took the helm. But those deals aren't meaningfully boosting its near-term revenues yet -- and its stock remains far below its debut price and its all-time high of $12.69. So should you buy BigBear.ai's stock at these levels? Let's take a fresh look at its business model, growth rates, and valuations to decide.

What sets BigBear.ai apart from other AI companies?

BigBear.ai plugs its modules into edge networks, which handle the data which flows between origin servers and their end users. By intercepting that data as it travels across those information superhighways, it can spot trends faster than local AI modules on origin servers.

The company develops three AI modules -- Observe, Orient, and Dominate -- which can ingest data, spot recurring trends, and predict future outcomes, respectively. It also shares its intercepted data with bigger data mining companies like Palantir (NASDAQ: PLTR). The rapid expansion of the generative AI market should drive more companies to install those modules across their edge networks.

BigBear.ai's acquisition of Pangiam added biometric tools -- including the real-time photo-scanning and digital ID tools used at airports and other ports of entry -- to its ecosystem. Tighter border control measures in the U.S. could generate strong tailwinds for that newer business.

Last month, the company also agreed to acquire Ask Sage -- which provides a generative AI platform for government and commercial clients -- to further expand its business. It expects to close that deal, which should immediately boost its recurring revenues, by the end of 2025 or early 2026.

How fast will BigBear.ai grow over the next few years?

For 2025, BigBear.ai expects its revenue to decline 11%-21% to $125-$140 million. It attributed that slowdown to some disruptions in its government contracts, particularly in its programs for the U.S. Army, as the federal government modernized and consolidated its data infrastructure.

Its backlog, which was at $385 million in the first quarter of 2025, also declined sequentially to $380 million in the second quarter and $376 million in the third quarter. Its gross margin also shrank 240 basis points year over year to 22.8% in the first nine months of 2025, while its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin -- which had improved under Long -- dropped from negative 3.8% to negative 24.8%.

That slowdown suggests the market's demand for its modules is cooling off. To make matters worse, it coincides with the accelerating growth of other government-oriented AI companies like Palantir. In other words, it seems as if BigBear.ai is falling behind its larger industry peers.

BigBear.ai is also relying more on acquisitions -- like Pangiam and Ask Sage -- to grow its revenues. Ask Sage is growing quickly (it's expected to grow its annual recurring revenues by roughly six times to $25 million in 2025), but it's doubtful it can maintain that breakneck momentum with so many other generative AI rivals in the market.

For 2026, analysts expect BigBear.ai's revenue to rise 23% to $164 million as it integrates Ask Sage. But for 2027, they expect its revenue to dip 2% to $162 million as it laps that acquisition. We should take those estimates with a grain of salt, but they imply its core business will keep shrinking on an organic basis as it runs out of room to grow in the rigid government space. It's also expected to stay unprofitable for the foreseeable future.

With an enterprise value of $3.07 billion, BigBear.ai isn't cheap at 19 times next year's sales. Therefore, I believe too much AI hype is baked into its shares -- but it probably can't grow into that premium valuation. For now, I'd avoid BigBear.ai and stick with more promising AI stocks instead.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends International Business Machines and Palantir Technologies. The Motley Fool has a disclosure policy.