Artificial intelligence continues to reshape the defense landscape, and both emerging innovators and established integrators are competing aggressively for relevance across federal agencies. BigBear.ai Holdings, Inc. (BBAI Quick QuoteBBAI - Free Report) and Leidos Holdings, Inc. (LDOS Quick QuoteLDOS - Free Report) sit at two different ends of this spectrum. BigBear.ai is a focused, AI-native company undergoing a strategic evolution, while Leidos is a multibillion-dollar defense and government services powerhouse embedding AI across its vast portfolio. Their missions overlap in national security, analytics, and digital modernization, and both benefit from long-term federal technology investment trends. This makes the pair particularly compelling to compare now, especially as each company recently released earnings updates and as agencies accelerate AI adoption across critical domains.

Although each company is exposed to similar federal spending drivers, the way they monetize AI differs greatly. BigBear.ai is aiming to become a core infrastructure provider for secure generative AI systems inside government environments, while Leidos is increasingly deploying AI as an enhancement to its existing solutions in defense, healthcare, aviation and infrastructure. 

Before deciding which stock presents more near-term opportunity, it’s essential to evaluate their fundamentals, strategic positioning and earnings trajectories. Let’s dive deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.

The Case for BigBear.ai Stock

BigBear.ai is in the middle of a major strategic shift from consulting to a scalable AI platform model. Its most important move is the planned acquisition of Ask Sage, a secure generative-AI platform built for government and national security use cases. Ask Sage already has more than 100,000 users across 16,000 government teams and supports dozens of frontier models used by the U.S. Space Force, Army and Defense Health Agency. The deal is expected to help BigBear become a core technology player in defense infrastructure and drive about $25 million in ARR in 2025—roughly six times 2024 levels—highlighting the rapid rise of secure AI demand in mission-critical environments.

Beyond the acquisition, BigBear.ai is scaling its operational presence through continued deployment of its VeriScan biometric capabilities in major airports, including Chicago O’Hare, Nashville International, and Seattle-Tacoma, and through increased adoption of its logistics and readiness analytics platforms in both domestic and international markets. Third-quarter 2025 earnings release noted that the company ended the quarter with a record $456.6 million in cash and investments, significantly strengthening its liquidity and enabling more aggressive strategic execution. This strong capital position gives BigBear.ai expansive optionality, ranging from pipeline expansion to further inorganic investments that continue building out a differentiated AI ecosystem.

Despite the long-term promise, challenges remain. Revenue declined 20% year over year due to lower Army program volumes and temporary disruptions caused by the government shutdown, which paused some intelligence-community activity. The company reported an adjusted EBITDA loss of $9.4 million, compared with breakeven performance in earlier quarters, and gross margin compressed to 22.4% from 25.9% last year. Management emphasized that about 80% of its government programs were deemed mission-essential during the shutdown, which helped limit deeper revenue disruption, but the dependence on timing-sensitive federal contracts remains apparent. The Ask Sage integration also introduces operational demands that will require careful alignment of teams, platforms, and customer-facing systems over the next several quarters.

Even with these near-term pressures, BigBear.ai’s strategic trajectory remains compelling. The combination of a sharply improving liquidity position, a rapidly expanding generative AI user base, and a backlog that reached $376 million during the quarter positions the company for potentially outsized benefit as the federal government intensifies its investment in AI-enabled mission systems through 2026 and 2027.

The Case for Leidos Stock

Leidos represents one of the most diversified and strategically entrenched players in the U.S. defense contracting ecosystem. Its third-quarter 2025 results highlight the company’s durability, scale, and consistent execution despite the unpredictable government environment. Leidos delivered revenues of $4.47 billion, up 7% year over year, along with adjusted EBITDA of $616 million and a margin of 13.8%. Management increased full-year EPS and margin guidance while reaffirming revenue and cash flow targets, signaling elevated confidence in its operating momentum.

The company’s recent contract wins reflect the breadth of its portfolio. These include a multiyear $2.2 billion classified intelligence award, a $760 million NASA human health and performance contract supporting astronaut readiness, a $540 million AI-enabled counterterrorism software award, a $370 million Department of Defense health-records modernization award, and a 19-year Kazakhstan air-traffic modernization program leveraging its SkyLine-X platform. Leidos also posted a book-to-bill ratio of 1.3 in the third quarter and achieved a 27% sequential increase in funded backlog, bringing total backlog to $47.7 billion. The magnitude of this pipeline provides exceptional multi-year revenue visibility that few federal contractors can match.

Leidos is advancing its NorthStar 2030 strategy with a sharper focus on AI-driven mission software, digital modernization, energy-infrastructure engineering and autonomous maritime systems. AI is now embedded across major solutions—from air-traffic control and counter-UAS to classified intelligence and energy-grid engineering—and partnerships like Quadridox highlight its push into next-generation security technology.

Performance wasn’t even across segments. Commercial & International revenue dipped, and Defense Systems margins tightened as early-phase production increased the material mix. Still, cash flow remains strong at $711 million, and the company strengthened its balance sheet by paying down $450 million in debt and raising its dividend by 7.5% over the prior quarter's dividend.

While BigBear.ai focuses almost exclusively on AI-centric innovation, Leidos integrates AI as a force multiplier within an already dominant services and systems-engineering franchise. This positions Leidos as a steady compounding enterprise with incremental AI upside, rather than as a high-volatility pure AI play.

How the Stocks Performed Over the Past Year (BBAI vs. LDOS)

BigBear.ai shares have surged 180% over the past year, significantly outperforming both the broader Zacks Computer and Technology sector, which rose 28.7% and the S&P 500, which advanced 15.8%. The stock’s rally reflects rapid investor enthusiasm surrounding its platform transition, strengthening balance sheet, and the expected contribution of Ask Sage.

Leidos shares rose 16.1% during the same period, a performance that slightly exceeded the S&P 500 but lagged the technology sector. Investors have treated Leidos less as a high-growth AI opportunity and more as a dependable federal-contracting compounder with consistent execution and a rising dividend profile.

BBAI & LDOS Performance

Image Source: Zacks Investment Research

Comparing Valuations of BBAI and LDOS Stocks

BigBear.ai currently trades at a forward 12-month price-to-sales multiple of 15.53, far above both the technology-sector median of 6.66X and Leidos’ far lower multiple of 1.37X. The premium assigned to BigBear.ai reflects the market’s anticipation of high growth and strategic positioning in secure AI deployments, while Leidos’ multiple aligns with its role as a mature, lower-volatility contractor with predictable cash flows.

Image Source: Zacks Investment Research

How Analyst Estimates Are Shifting for BBAI & LDOS

BigBear.ai’s earnings outlook has improved meaningfully. The Zacks Consensus Estimate for its 2025 loss per share narrowed from a loss of $1.10 to a loss of 93 cents over the past month, and 2026 estimates point to a further reduction in losses to 25 cents. Revenue forecasts imply a 16.1% decline in 2025 due to one-time disruptions but rebound sharply with expected growth of 30.2% in 2026.

BBAI Stock

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Leidos’ EPS trend shows steady and positive momentum. The 2025 EPS estimate increased from $11.27 to $11.67, representing year-over-year growth of 14.3%, while 2026 earnings are expected to rise 4.8%. Revenue growth projections for both years stand at 3.3%.

The divergence reflects differing business models — BigBear.ai is improving rapidly from negative earnings, while Leidos continues its trajectory of stable, incremental growth.

LDOS Stock

Image Source: Zacks Investment Research

Which Defense-Focused AI Stock Is the Better Buy Now?

Both companies offer compelling investment narratives. Leidos provides durability, scale, and consistent profitability, supported by a massive backlog, deep customer relationships, and expanding AI-enhanced capabilities. Its valuation remains inexpensive relative to its stability, and its capital-return profile continues to strengthen.

BigBear.ai, however, offers significantly greater near-term upside potential. Its transformation into a secure AI-platform provider, the rapid growth trajectory of Ask Sage, its expanding government footprint and its strengthened liquidity position all create a scenario where upside optionality is far greater than that of a mature integrator. The improving earnings outlook for this Zacks Rank #2 (Buy) company suggests stronger momentum behind BigBear.ai at this stage of the AI adoption cycle. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For investors seeking stability and long-term compounding, Leidos — carrying a Zacks Rank #3 (Hold) — remains a strong choice. For those prioritizing higher growth potential and more direct exposure to defense-grade AI acceleration, BigBear.ai appears to be the solid bet right now with more upside potential in the near term.