Palantir has emerged as a disruptive pressure within the AI realm, ushering in a wave of enthusiastic buyers to the protection tech area.
Palantir Applied sciences was the top-performing inventory within the S&P 500 and Nasdaq-100 throughout the first half of 2025. With shares hovering by 80% by way of the primary six months of the yr — and by 427% over the past 12 months — Palantir has helped drive quite a lot of consideration to the intersection of synthetic intelligence (AI) and protection contracting.
Palantir is much from the one firm looking for to disrupt protection tech. Just a little-known competitor to the corporate is BigBear.ai (BBAI -3.35%), whose shares are up by a powerful 357% over the past yr.
Might BigBear.ai emerge as the subsequent Palantir? Learn on to search out out.
BigBear.ai is an thrilling firm on this planet of protection tech, however…
BigBear.ai’s share value volatility thus far this yr mimics the actions of a rollercoaster. Initially, shares rose significantly shortly following President Donald Trump’s inauguration and the next announcement of Challenge Stargate — an infrastructure initiative that goals to speculate $500 billion into AI tasks by way of 2029.
Nevertheless, these early features retreated following the Pentagon’s plans to cut back its price range by 8% yearly.
Whereas lowered spending from the Division of Protection (DOD) was initially seen as a significant blow to contractors comparable to Palantir and BigBear.ai, the developments illustrated above counsel that shares rebounded sharply — implying that the sell-offs again in February might have been overblown. Why is that?
In my eyes, a significant contributor to the restoration in protection shares got here after Protection Secretary Pete Hegseth introduced his intentions to double down on a method dubbed the Software program Acquisition Pathway (SWP).
In actuality, the DOD’s price range cuts are centered on areas which can be deemed non-essential or inefficient. For instance, the Pentagon freed up billions in capital by lowering spend with consulting companies comparable to Booz Allen Hamilton, Accenture, and Deloitte. As well as, a contract revolving round an HR software program system managed by Oracle was additionally minimize.
Underneath the SWP, it seems that the DOD is definitely seeking to unlock capital so as to double down on extra tech-focused initiatives and establish distributors that may really deal with the Pentagon’s subtle workflows.
With a lot alternative up for grabs, it is probably that optimistic buyers noticed this as a tailwind for BigBear.ai. This logic is not too far off base, both.
BigBear.ai’s CEO is Kevin McAleenan, a former authorities official with shut ties to the Trump administration. McAleenan’s strategic relationships throughout the authorities mixed with the DOD’s deal with working with main software program companies suppliers probably has some buyers shopping for into the concept BigBear.ai will not be flying below the radar for much longer.
Picture supply: Getty Pictures.
…how does the corporate actually stack up beside Palantir?
The graph beneath breaks down income, gross margin, and web revenue for BigBear.ai over the past yr. With simply $160 million in gross sales, the corporate tends to generate inconsistent gross margins — which prime out at lower than 30%. Furthermore, with a reasonably small gross sales base and unimpressive margin profile, it is not stunning to see BigBear.ai’s losses proceed to mount.
BBAI Income (TTM) knowledge by YCharts
By comparability, Palantir generated $487 million in authorities income throughout the first quarter of 2025. In different phrases, Palantir’s authorities operation generates practically triple the quantity of income in a single quarter that BigBear.ai does in a complete yr. On prime of that, Palantir’s gross margins hover round 80%, whereas the corporate’s web revenue over the past 12 months was over $570 million.
Is BigBear.ai inventory a purchase proper now?
Proper now, BigBear.ai trades at a price-to-sales (P/S) ratio of round 11. Whereas this may occasionally look “low cost” in comparison with Palantir’s P/S a number of of 120, there’s a purpose for the valuation disparity between the 2 AI protection contractors.
Palantir boasts giant, fast-growing private and non-private sector companies that command robust revenue margins. Against this, BigBear.ai goes to have a tough time scaling as long as it retains burning by way of heaps of money.
Not solely would I go on BigBear.ai inventory, however I additionally don’t see the corporate turning into the subsequent Palantir. Palantir is in a league of its personal within the protection tech area, and I don’t see BigBear.ai as a formidable challenger.
Adam Spatacco has positions in Palantir Applied sciences. The Motley Idiot has positions in and recommends Abbott Laboratories, Accenture Plc, Oracle, and Palantir Applied sciences. The Motley Idiot has a disclosure coverage.
