Why BigBear.ai Stock Slumped Last Month

Shares of BigBear.ai Holdings (NYSE: BBAI) slipped 14.8% in December, according to data from S&P Global Market Intelligence. An artificial intelligence (AI) player focused on the corporate and government markets, BigBear.ai is experiencing declining revenue and substantial losses, but has recently acquired a generative AI company and retired most of its outstanding debt.

Here's why BigBear.ai stock fell in December, and whether you should buy shares for your portfolio today.

Betting on generative AI

BigBear.ai provides software solutions to government agencies and large industrial assets. These include analytics for defense, intelligence, shipyards, and manufacturing, enabling large organizations to organize data across the globe. Think of it as a competitor to Palantir Technologies, but on a much smaller scale.

Although a company like BigBear.ai boasts impressive analytical capabilities, its revenue has not increased significantly during the AI revolution. Revenue was just $144 million over the last twelve months, which is flat compared to 2022. Over the same time period, Palantir's revenue has increased significantly as it wins more government and business contracts.

To enhance its capabilities, BigBear.ai has completed a $250 million acquisition of Ask Sage, a generative AI company that collaborates extensively with government teams under stringent security protocols. On the one hand, an investor may think BigBear.ai is making this acquisition in desperation, which is why the stock has begun to stagnate. On the other hand, Ask Sage aligns perfectly with BigBear.ai's existing portfolio of capabilities and can be easily layered onto existing contracts.

Image source: Getty Images.

Should you buy BigBear.ai stock?

After falling last month, BigBear.ai has a market cap of $2.7 billion. This may seem small compared to a competitor like Palantir Technologies, but it is still quite the premium compared to BigBear.ai's current revenue, growth, and unprofitability. BigBear.ai's revenue was $144 million over the last twelve months, with a 20% year-over-year decline last quarter. However, it was able to use some cash to recently retire a lot of its convertible debt.

The company consistently loses money, with a free cash flow of negative $47 million over the last twelve months. It is never a good combination to see declining revenue and heavy losses for a supposedly disruptive organization. Even worse may be the shareholder dilution. Over the last three years, the shares outstanding for BigBear.ai have increased by over 200%, which will be a significant headwind to long-term stock price appreciation. This is one of the most dilutive stocks in the world.

When everything is put together, it is no surprise that BigBear.ai stock fell last month. Don't get fooled by the name; this is not a stock you want to own in 2026.

Brett Schafer 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.