Where Will BigBear.ai Stock Be in 1 Year?

Key Points

• BigBear.ai stock has shot up impressively in the past year, but the pace of sales growth is very slow.

• Though the company has a nice backlog, this may or may not lead to an acceleration in that growth.

• The artificial intelligence platform needs to strongly move into the commercial market to step on the gas.

• 10 stocks we like better than BigBear.ai ›

BigBear.ai Holdings (NYSE: BBAI) has been in sizzling form on the stock market in the past year despite bouts of volatility, gaining a stunning 430% as of this writing. This phenomenal surge, however, seems a bit surprising when we take a closer look at the company's financial performance.

BigBear.ai's artificial intelligence (AI) software platform is being deployed in multiple verticals such as national security, digital identification and biometrics, and supply chain management to enable improved decision-making. The company says that the "majority of our revenue is derived from federal government contracts."

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This explains why investors have been buying BigBear.ai stock hand over fist in the past year as one of its peers, Palantir Technologies, has witnessed a remarkable improvement in its growth thanks to the proliferation of AI. However, will BigBear.ai be able to sustain its stock market momentum in the coming year?

Image source: Getty Images.

Growth hasn't been explosive enough to support its red-hot rally

Though BigBear.ai is in the business of selling AI software solutions and services, its growth hasn't been exciting. The company's revenue in the first quarter of 2025 increased by just 5% year over year to $35 million. BigBear.ai attributed this slight improvement to additional revenue from the Department of Homeland Security and digital identity contracts.

This reliance on government contracts and programs is probably one of the reasons why BigBear.ai hasn't been clocking explosive growth like some of its peers. A delay in approvals or changes in government budgets and funding can stifle the company's growth. In fact, even Palantir's growth is taking off after it started focusing on commercial customers, who have been flocking toward its Artificial Intelligence Platform (AIP) to integrate generative AI into their operations to improve productivity and increase efficiency.

The company's revenue in the first quarter of 2025 increased 39% year over year to $884 million as it struck bigger deals and brought more commercial customers on board. That was a major improvement over the 18% revenue growth Palantir reported in the first quarter of 2023, which ended just before it launched AIP for both commercial and government use.

BigBear.ai, therefore, will have to focus on expanding the reach of its AI software solutions beyond the government sector if it wants to step on the gas. The good part is that the company's revenue forecast of $160 million to $180 million for the current year would translate into a 7% increase from 2024, an improvement over the 2% annual growth it reported last year.

However, BigBear.ai didn't increase its guidance when it released its Q1 results a couple of months ago. What this indicates is that the company is yet to find a solid-enough catalyst that will help it capitalize on the AI software platforms market that's set to generate a whopping $153 billion in annual revenue in 2028, according to IDC.

Of course, the company does claim to be winning new business at a nice pace, but there is a catch. BigBear.ai points out that its revenue backlog increased by 30% in Q1 to $385 million. However, a breakdown of that number tells us that less than $20 million of its backlog was funded. BigBear.ai points out that the funded backlog refers to the services that are yet to be provided as part of an existing contract.

A whopping $279 million of its backlog was classified under the "priced, unexercised options" category. This refers to "the remaining contract value of goods and services to be delivered under existing contracts if our customer elects to exercise all the options available in the contract."

So, investors would do well to read into BigBear.ai's backlog with a pinch of salt, as its revenue growth may remain under pressure if its customers don't exercise the entirety of their contracts.

The coming year may be a difficult one for the stock

The big jump in BigBear.ai's stock over the past year has brought its price-to-sales ratio to 12. This is expensive when we consider that C3.ai, another company which sells enterprise AI software solutions to governments and businesses, has a sales multiple of less than 9, and is growing at a substantially faster rate than BigBear.ai.

BigBear.ai stock, therefore, seems to have run ahead of itself. Its growth rate isn't good enough to justify its valuation, and that probably explains why the stock's 12-month median price target of $5 points toward a potential drop of 34% from current levels. So investors looking to buy BigBear.ai now may have to endure a difficult time in the next year.

But then, it would be worth keeping an eye on this stock, as BigBear.ai serves a fast-growing market, and it won't be surprising to see it accelerate in the future if it manages to bring more commercial customers into its fold to boost growth.

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Harsh Chauhan 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.