BigBear.ai (BBAI -3.26%) has had quite the 2025. The stock is up an outstanding 70% year to date, but it has also been down as much as 46%. This stock has been an absolute rollercoaster ride for investors, but those who have stayed patient have done well.
Here’s the big question: Will the rollercoaster ride continue its upward trend, or is a huge drop ahead? Let’s take a look at what’s in store for the rest of 2025 to see whether this is a smart artificial intelligence (AI) stock to scoop up now.
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BigBear.ai’s revenue is tied to a few clients
BigBear.ai is one of the few pure-play AI companies available on the market. Often, the largest AI players have other offerings that make AI an ancillary play, but BigBear.ai is not one of them. BigBear.ai offers several services, but most are specifically targeted toward U.S. government clients. However, it has also announced several key product wins with the United Arab Emirates.
Still, BigBear.ai doesn’t have a ton of clients. In 2024, four customers accounted for 52% of total revenue. That’s extreme concentration and could be a problem for BigBear.ai if one of them decides to discontinue their contract. This happened in 2024, as a customer who accounted for 19% of revenue in 2022 and 9% in 2023 is no longer a client.
If this happens with other customers, it could spell disaster for the stock. However, as BigBear.ai gains more clients and becomes more deeply integrated with its existing ones, this risk decreases. This isn’t a show-stopper for the stock, but it’s a risk that all investors should be aware of.
Another factor with BigBear.ai is that it’s not growing at a rapid pace. In the first quarter, revenue increased by 5% year over year. However, that doesn’t tell the complete picture because the backlog increased by 30%. This indicates that BigBear.ai saw a large increase in contracts but hasn’t recognized the revenue. This will provide some growth in the future, but investors will want to see both numbers moving nearly in tandem in the future.
Still, with BigBear.ai’s relatively small revenue base (it generated $160 million over the past 12 months), signing a new, significant contract could send shares soaring. There’s no way of knowing what’s on the horizon with BigBear.ai, so it’s all a guessing game regarding whether a huge contract is coming its way.
Should there be an announcement, don’t be surprised if the stock experiences a significant movement following the news. That’s what investors are holding on to, because the rest of the business appears somewhat suspect.
BigBear.ai’s gross margins are one thing to watch
Compared to most software companies, BigBear.ai’s gross margins are poor.
BBAI Gross Profit Margin (Quarterly) data by YCharts.
Typical software companies report gross margins between 70% and 80%, with the best achieving margins of over 90%. However, BigBear.ai’s are a lot lower because it’s more of a service-oriented AI company than a Software-as-a-Service (SaaS) business model.
This caps the maximum profit BigBear.ai will one day be able to make (it’s currently deeply unprofitable). As a result, when investors see that the stock is trading for under 12 times sales, they shouldn’t assume that it’s necessarily cheap.
BBAI PS Ratio data by YCharts. PS Ratio = price-to-sales ratio.
The reality is that BigBear.ai’s stock is currently very expensive, given its growth and gross margins. While there could be an announcement that drives the stock higher and justifies today’s price tag, I will not be participating in finding out. BigBear.ai’s stock is currently being driven by hype rather than actual results, and while the stock may continue to rise, it will be unpredictable. Additionally, it could crash if it reports poor quarterly earnings.
There are far too many great AI stocks available at attractive prices to be messing around with BigBear.ai’s stock, and I’d rather be invested in proven winners than stocks driven by hype.
Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
