Is BigBear.ai (BBAI) Stock a Buy Now?

BigBear.ai (NYSE: BBAI), a developer of artificial intelligence (AI) modules for edge networks, went public through a merger with a special purpose acquisition company (SPAC) four years ago. The combined company's stock started trading at $9.84 per share, but it sank as low as $0.63 a year later after it missed its own bullish forecasts. It now trades at about $6.

In its pre-merger presentation, BigBear.ai claimed its revenue could soar from $182 million in 2021 to $550 million in 2024. Unfortunately, its revenue only rose from $146 million in 2021 to $158 million in 2024, as its top customer, Virgin Orbit, went bankrupt, it faced stiff competition from other AI companies, and macroeconomic headwinds curbed enterprise software spending.

Three different CEOs have also led the company since its public debut, and it's still deeply unprofitable. Those challenges make BigBear.ai seem like an unattractive investment, but could it be worth nibbling on as a turnaround play for 2026?

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What happened to BigBear.ai over the past two years?

BigBear.ai develops three AI modules -- Observe, Orient, and Dominate -- which ingest data, identify trends, and predict outcomes, respectively. It plugs its modules into edge networks, which intercept the data that flows between origin servers and end users.

By installing its modules on edge networks, BigBear.ai aims to process more data at a faster rate than local AI applications on origin servers. Its modules run complex and mission-critical applications, which makes them well-suited for government projects. In 2024, then-CEO Mandy Long orchestrated BigBear.ai's all-stock acquisition of Pangiam, an AI vision firm that produced biometric identity tools for the U.S. government.

Pangiam's CEO, Kevin McAleenan, who previously served as the Acting Secretary of the Department of Homeland Security (DHS) during the first Trump Administration, succeeded Long as BigBear.ai's CEO in January 2025. Under McAleenan, BigBear.ai secured fresh digital ID and biometrics initiatives for the DHS, a modernization project for the U.S. military's Orion Decision Support Platform (DSP), and new supply chain projects. The bulls initially believed that tighter border controls and increased military spending would generate strong tailwinds for its business.

However, those government contracts aren't boosting its near-term revenue or widening its moat against bigger AI companies like Palantir (NASDAQ: PLTR) and C3.ai (NYSE: AI). Most of those projects are locked into fixed-price contracts, which it can't renegotiate if its costs increase, and they'll slowly generate revenue over the next few years.

To boost its recurring revenue and expand its ecosystem, BigBear.ai acquired Ask Sage, a developer of generative AI tools for government and commercial clients, for $250 million in cash in December. That acquisition wasn't surprising, since it had acquired Pangiam for similar reasons, but it suggests that its core business is running out of room to expand organically.

What will happen to BigBear.ai over the next two years?

For 2025, BigBear.ai expects its revenue to decline 11% to 21% (to $125 million to $140 million) as it grapples with disruptions in its government contracts -- especially with the U.S. Army -- while the federal government modernizes and consolidates its data infrastructure. Analysts expect its revenue to decline 16% to $134 million.

The company's backlog also shrank from $385 million in the first quarter to $376 million in the third quarter, indicating there isn't much pent-up demand for its products. In the first nine months of 2025, its gross margin contracted 240 basis points year-over-year to 22.8%, as its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin plummeted from negative 3.8% to negative 24.8%. For the full year, analysts expect it to post a negative adjusted EBITDA of $33 million, compared to a negative $2 million in 2024.

For 2026, analysts expect BigBear.ai's revenue to increase 23% to $164 million, as its adjusted EBITDA improves to a negative $15 million. However, most of that growth will come from its acquisition of Ask Sage. In 2027, analysts expect its revenue to decline 2% to $162 million as it laps that acquisition, but its adjusted EBITDA could approach breakeven levels.

Is it the right time to buy BigBear.ai's stock?

We should take those estimates with a grain of salt, but they indicate BigBear.ai will struggle to break out of its niche and attract more attention from government and commercial clients. As it seeks new ways to expand, it will likely continue to dilute its shares through additional secondary offerings. It's already more than tripled its number of shares since its SPAC merger.

With an enterprise value of $2.4 billion, it still appears pricey at 14 times its projected 2026 sales. BigBear.ai's acquisition of Ask Sage should boost its near-term sales, but I wouldn't buy its stock unless it stabilizes its core business, secures bigger contracts, expands its commercial business, and expands its margins again.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.