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Can BigBear.ai Fix Its Margin Pressure While Scaling GenAI?

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Key Takeaways

  • Margin pressure is intense as BBAI battles funding delays and elevated costs tied to platform expansion.
  • Ask Sage adds a FedRAMP-High GenAI platform, positioning BigBear.ai for future high-margin and revenue.
  • BBAI's mission-centric niche and growing federal traction support a compelling long-term growth setup.

BigBear.ai Holdings, Inc. (BBAI - Free Report) has been facing margin pressures since the start of 2025. The gross margin contracted 240 basis points (bps) to 22.8% year over year and the adjusted EBITDA margin was at a negative of 24.8% (compared with negative 3.8% a year ago) in the first nine months of 2025. The tepid performance was due to lower volume on certain Army programs, alongside delays in government funding on certain programs and elevated restructuring costs (223.2% up year over year). Also, high research and development expenses due to increased headcount and the timing of certain research and development projects added to the headwinds.

However, these near-term hurdles will not restrain BBAI from gaining in the long term. The company’s acquisition of Ask Sage, a FedRAMP-High, model-agnostic generative AI platform, is already deployed across 16,000 government teams. Ask Sage’s ability to run secure AI models at the tactical edge offers BigBear.ai an immediate leap forward in generative AI capability, precisely the kind of platform that can unlock higher-margin recurring revenues over time.

BBAI is betting that integrating Ask Sage with its own mission-centric products, cross-selling into its federal and commercial base and layering services and mission-specific agents on the platform will create operating leverage. Meanwhile, momentum across airports, DHS, the intelligence community and international markets shows that the core business is expanding even before Ask Sage contributes.

BigBear.ai is susceptible to market risks, from a partial government shutdown to ongoing contract mix volatility. But its strategic direction in accretive investments for scaling in generative-AI (GenAI) in the long term is commendable. If management delivers per its robust business model, today’s margin costs may ultimately buy years of defensible, high-margin growth.

BigBear.ai’s Competitive Position

BigBear.ai competes in the GenAI arena from a niche, mission-focused starting point, with key market players, including Palantir Technologies Inc. (PLTR - Free Report) and C3.ai, Inc. (AI - Free Report) .

Palantir Technologies sits as a platform incumbent that packages data integration, model orchestration and agent-style workflows into an enterprise AI stack (AIP/Foundry). It is designed to power large, regulated customers and deep systems integrations as strategic partnerships are further scaling its go-to-market. On the other hand, C3.ai has doubled down on “agentic” and generative capabilities for vertical enterprise use cases, offering prebuilt agents and orchestration that target fast time-to-value for industries from utilities to manufacturing.

BigBear.ai’s competitive advantage is narrow but real; its deep mission expertise and tailored defense or government solutions can outcompete generalist platforms on highly regulated and domain-specific workflows. The competitive edge remains even when Palantir Technologies and C3.ai leverage larger scale, richer ecosystems and faster enterprise adoption paths.

BBAI Stock’s Price Performance & Valuation Trend

Shares of this Virginia-based AI-powered decision intelligence solutions provider have moved upward 56% in the past six months, outperforming the Zacks Computers - IT Services industry, the Zacks Computer and Technology sector and the S&P 500 index.

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Image Source: Zacks Investment Research

BBAI stock is currently trading at a discount compared with the industry peers, with a forward 12-month price-to-sales (P/S) ratio of 15.52, as evidenced by the chart below.

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Image Source: Zacks Investment Research

EPS Trend of BBAI

BBAI’s bottom-line estimates for 2025 and 2026 have contracted over the past 30 days at a loss per share of 93 cents and 25 cents, respectively. The revised estimated figures for 2025 and 2026 indicate year-over-year growth of 15.5% and 72.8%, respectively.

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Image Source: Zacks Investment Research

BigBear.ai stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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