BigBear.ai Holdings, Inc. (BBAI Quick QuoteBBAI - Free Report) has once again captured investor attention after its shares jumped 22% following a new strategic partnership with Tsecond, Inc. The two companies are collaborating to deliver AI-enabled edge infrastructure designed for U.S. national security operations, a field where BigBear.ai increasingly finds itself compared with established players like Palantir Technologies (PLTR Quick QuotePLTR - Free Report) and C3.ai (AI Quick QuoteAI - Free Report) . The partnership underscores BigBear.ai’s growing influence in defense-oriented artificial intelligence but also reignites questions about its long-term profitability, valuation and execution challenges.

Strategic Deal Reinforces Defense AI Capabilities of BBAI

The collaboration with Tsecond combines BigBear.ai’s ConductorOS orchestration software with Tsecond’s BRYCK hardware to create a deployable edge-AI platform for mission-critical operations. The joint solution enhances real-time data processing, decision-making and threat detection in disconnected environments—an essential advantage for defense and intelligence operations.

CEO Kevin McAleenan described the collaboration as a step toward “mission-ready AI at the tactical edge,” a capability critical for next-generation warfare. This deal strengthens BigBear.ai’s defense profile and provides a technological bridge between traditional command-and-control software and autonomous decision-making systems — an area also targeted by Palantir and C3.ai through their defense-analytics platforms.

National Security Tailwinds: BigBear.ai in the Right Place

The timing of the Tsecond agreement coincides with the rollout of the One Big Beautiful Bill (OB3), which allocates $150 billion to the Department of Defense and $170 billion to the Department of Homeland Security for disruptive AI and security technologies. McAleenan called the funding “transformative,” noting that BigBear.ai’s capabilities in biometrics, logistics, and autonomous coordination directly align with federal spending priorities.

BigBear.ai’s ConductorOS has already demonstrated success in drone-swarming applications for the U.S. Army, while its veriScan biometric system operates across 25 airports and 500 gates. With OB3 earmarking $6.2 billion for border-security technology and $673 million for biometric exit programs, these deployments position BigBear.ai alongside Palantir and C3.ai as potential beneficiaries of a national defense digital-modernization push.

The company is also expanding globally through partnerships in the UAE under the IHC umbrella and with Narval Holdings in Panama. These ventures mirror international strategies pursued by Palantir, which has established European defense partnerships, and C3.ai, which is pursuing NATO-aligned contracts. Such parallels reinforce BigBear.ai’s bid to join the ranks of recognized defense-AI integrators.

Financial Health: Strong Liquidity, Weak Profitability

From a balance-sheet perspective, BigBear.ai is in its best financial shape ever. As of June 30, 2025, the company held a record $390.8 million in cash, turning net cash positive for the first time with nearly $250 million more cash than debt. This liquidity provides critical flexibility to invest in product innovation, marketing and acquisitions.

However, operational performance remains a concern. Second-quarter 2025 revenue fell 18% year-over-year to $32.5 million, primarily due to disruptions in Army programs undergoing data system modernization. The company posted a net loss of $228.6 million, widened by goodwill impairment and non-cash derivative revaluation. Adjusted EBITDA came in at negative $8.5 million compared with negative $3.7 million in the prior-year quarter. Gross margin also slipped to 25% from 27.8%, signaling ongoing cost pressures.

While the cash infusion from its at-the-market share offering strengthens liquidity, the high dilution—roughly 75 million new shares issued—adds to shareholder risk. Still, the CFO noted that the raise was executed at a favorable average price of $3.90 per share, suggesting investor confidence in the company’s strategic vision.

Going on Offense in Defense AI

BigBear.ai management is clear about its next phase: growth through both organic expansion and acquisitions. With record liquidity and strong market tailwinds, BigBear.ai plans to deploy capital into capture campaigns tied to OB3 funding and private-sector security initiatives. The firm is also scouting strategic acquisitions to boost its scale, enter adjacent AI markets, and enhance its technological portfolio.

The Tsecond partnership fits into this broader offensive strategy, allowing BigBear.ai to deliver AI directly at the tactical edge—a fast-growing segment as militaries seek decentralized, resilient computing. This capability could differentiate BigBear.ai from competitors like Palantir and C3.ai, which remain more cloud-reliant in defense contexts.

At the same time, the company is investing in next-generation technologies such as agentic AI, physical AI and IoT integrations, reflecting its intent to move beyond traditional analytics toward real-world automation in security and logistics settings.

BBAI Share Performance Outpaces the Sector

Over the past three months, BigBear.ai shares have climbed about 27.4%, sharply outperforming the Zacks Computers – IT Services industry (down 6%), the Zacks Computer and Technology sector (up 11.4%), and the S&P 500 Index (up 5.9%). The stock currently trades around $8.81 (as of Oct. 13), compared with a 52-week high of $10.36 and a low of $1.51.

This momentum reflects renewed optimism after the Tsecond announcement, which investors see as validation of BigBear.ai’s shift from a data-services vendor toward a defense-focused AI integrator.

BBAI Share Price Performance

Image Source: Zacks Investment Research

Challenges: Contract Volatility and Execution Risk

Despite its potential, BigBear.ai faces near-term execution challenges. The company’s 2025 revenue guidance of $125–$140 million implies a decline from 2024, and management has withdrawn its adjusted EBITDA outlook due to uncertainty around Army contracts. This volatility highlights BigBear.ai’s continued dependence on a few large federal contracts, a risk the CEO acknowledged and vowed to mitigate through diversification.

Moreover, scaling internationally brings new regulatory and integration complexities. While the UAE and Panama partnerships are promising, they also expose the firm to geopolitical risks and execution hurdles in markets with different procurement cycles.

Another concern is valuation. BigBear.ai trades at a forward 12-month price-to-sales ratio of about 23.9x, a premium to the industry average of 16.7x and far above its three-year median of 2.06x. This suggests that much of the optimism around its AI defense positioning may already be priced in.

BBAI Valuation

Image Source: Zacks Investment Research

Conclusion

BigBear.ai’s partnership with Tsecond strengthens its position in defense-focused AI, aligning directly with U.S. national security funding priorities under OB3. The firm’s strong liquidity of $390.8 million offers financial flexibility to invest in growth and acquisitions despite near-term profitability challenges. 

While execution risks and contract dependencies persist, the momentum from the Tsecond deal, defense market tailwinds and expanding global reach suggest improving long-term potential. With shares up 27% in three months, holding BBAI appears prudent as the company refines its strategic execution. BBAI stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.