Is BigBear.ai the Next Palantir for AI Defense?

Published Date : 20/07/2025 

While Palantir has been the star in the AI defense space, BigBear.ai is emerging as a potential contender. But can it match Palantir's performance and scale? 

Palantir Technologies has emerged as a disruptive force in the AI realm, attracting a wave of enthusiastic investors to the defense tech space. With shares soaring by 80% in the first half of 2025 and a 427% increase over the last 12 months, Palantir has driven significant attention to the intersection of artificial intelligence (AI) and defense contracting.

BigBear.ai, a lesser-known competitor, has also seen impressive gains with its shares up by 357% over the last year. Could BigBear.ai emerge as the next Palantir? Let’s delve into the details.

BigBear.ai: An Exciting Player in Defense Tech

BigBear.ai's share price has been a rollercoaster, with significant initial gains following President Donald Trump's inauguration and the announcement of Project Stargate—a $500 billion investment initiative in AI projects through 2029. However, these gains were followed by a retreat when the Pentagon announced plans to reduce its budget by 8% annually.

Despite the initial sell-offs, shares rebounded sharply, suggesting that the budget cuts may have been overblown. Defense Secretary Pete Hegseth’s announcement of the Software Acquisition Pathway (SWP) strategy, aimed at doubling down on tech-focused initiatives, likely contributed to this recovery.

The DOD's budget cuts are focused on non-essential areas, such as reducing spend with consulting firms like Booz Allen Hamilton, Accenture, and Deloitte, and cutting a contract with Oracle for an HR software system. This reallocation of capital towards more tech-focused initiatives is seen as a positive for companies like BigBear.ai.

CEO Kevin McAleenan: A Strategic Advantage

BigBear.ai’s CEO, Kevin McAleenan, a former government official with close ties to the Trump administration, adds a strategic advantage. His relationships within the government, combined with the DOD's focus on leading software services providers, have likely bolstered investor confidence in BigBear.ai’s future.

Comparing BigBear.ai and Palantir

To understand BigBear.ai’s potential, it’s essential to compare it with Palantir. BigBear.ai generated $160 million in sales over the last year, with inconsistent gross margins topping out at less than 30%. The company continues to incur losses, which is not surprising given its small sales base and unimpressive margin profile.

In contrast, Palantir generated $487 million in government revenue in the first quarter of 2025 alone—nearly triple what BigBear.ai does in an entire year. Palantir boasts gross margins around 80% and net income over $570 million over the last 12 months.

Is BigBear.ai Stock a Buy?

Currently, BigBear.ai trades at a price-to-sales (P/S) ratio of around 11, which might seem attractive compared to Palantir’s P/S multiple of 120. However, the valuation disparity is justified by Palantir’s large, fast-growing public and private sector businesses with strong profit margins.

BigBear.ai, on the other hand, faces challenges in scaling due to its cash burn. While the company shows promise, it is not yet a formidable challenger to Palantir. Therefore, it might be prudent to pass on BigBear.ai stock for now.

Conclusion

While BigBear.ai has shown impressive gains and has strategic advantages, it still has a long way to go to match Palantir’s performance and scale. Investors should carefully consider the risks and potential before making any investment decisions in this dynamic and competitive sector. 

Frequently Asked Questions (FAQS): 

Q: What is Project Stargate?

A: Project Stargate is a $500 billion infrastructure initiative aimed at investing in AI projects through 2029, announced shortly after President Donald Trump's inauguration.

Q: What is the Software Acquisition Pathway (SWP)?

A: The SWP is a strategy announced by Defense Secretary Pete Hegseth to double down on tech-focused initiatives and identify vendors that can handle the Pentagon's sophisticated workflows.

Q: Who is Kevin McAleenan and what is his role in BigBear.ai?

A: Kevin McAleenan is the CEO of BigBear.ai and a former government official with close ties to the Trump administration, which adds a strategic advantage to the company.

Q: How does BigBear.ai’s financial performance compare to Palantir’s?

A: BigBear.ai generated $160 million in sales with gross margins less than 30%, while Palantir generated $487 million in government revenue in a single quarter with gross margins around 80%.

Q: Is BigBear.ai a good investment right now?

A: While BigBear.ai shows promise, it is currently facing challenges in scaling and profitability. It might be prudent to pass on BigBear.ai stock for now and monitor its progress. 

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