The artificial intelligence investment boom has pushed capital far beyond mega-cap leaders into smaller, higher-risk AI specialists with the potential for outsized returns. Among these emerging names, BigBear.ai Holdings (BBAI Quick QuoteBBAI - Free Report) and SoundHound AI (SOUN Quick QuoteSOUN - Free Report) have drawn growing investor attention. Both companies operate at the intersection of applied AI and real-world enterprise deployments, but they approach the opportunity from very different angles.

BigBear.ai is deeply embedded in defense, intelligence and other highly regulated government markets, focusing on secure, mission-critical decision intelligence. SoundHound, by contrast, is a commercial AI platform leader centered on voice, conversational, and agentic AI solutions across automotive, restaurants, financial services, and enterprise customer experience. Despite their different end markets, both stocks appeal to investors seeking leveraged exposure to AI adoption beyond hyperscalers.

With AI spending accelerating and risk appetite rising, the comparison between these two smaller-cap AI plays has become increasingly relevant. Each offers high growth potential, but each also carries execution, profitability, and valuation risks. 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’s investment thesis is anchored in its positioning as a defense-grade AI and decision intelligence specialist. The company fuses artificial intelligence with deep mission expertise to support national security, intelligence, border security and other sensitive government functions. While that focus creates revenue volatility tied to government funding cycles, it also builds high barriers to entry and long-term contract durability once programs scale.

Near-term performance has been uneven. In the third quarter of 2025, revenue declined 20% year over year to $33.1 million primarily due to lower volumes on certain Army programs, highlighting BigBear.ai’s exposure to program timing and government procurement delays. Gross margin slipped to 22.4% from 25.9% a year earlier, and adjusted EBITDA swung to a loss of $9.4 million as SG&A rose to support growth initiatives. In contrast, SoundHound delivered strong top-line acceleration in the same period, underscoring a key divergence between the two models.

However, BigBear.ai’s strategic narrative shifted meaningfully in 2025. The company ended the third quarter with a record $456.6 million in cash, dramatically strengthening its balance sheet and enabling a more aggressive growth posture. That capital strength underpins its most important catalyst: the announced acquisition of Ask Sage, a fast-growing generative AI platform designed for secure, classified and regulated environments.

Ask Sage is expected to generate approximately $25 million in annual recurring revenue in 2025, representing a sixfold increase from 2024 levels, and already supports more than 16,000 government teams across multiple agencies. Unlike many early-stage AI platforms, Ask Sage is already in production at scale, with FedRAMP-aligned security and model-agnostic architecture. Management views the deal as transformative, accelerating BigBear.ai’s transition toward platform-level, recurring revenue rather than reliance on episodic services contracts.

Strategically, this move differentiates BigBear.ai from SoundHound. While SoundHound focuses on horizontal enterprise adoption, BigBear.ai is building a vertically integrated, secure AI platform tailored to defense and regulated customers, where competition is narrower and switching costs are higher. Backlog stood at $376 million at the end of the third quarter, providing medium-term revenue visibility even as quarterly results fluctuate.

Risks remain material. BigBear.ai’s revenue base is still heavily concentrated in government programs, margin recovery will take time, and integration risk around Ask Sage is real. Yet relative to SoundHound, BigBear.ai offers a clearer path to differentiation in a less crowded AI segment, backed by a fortified balance sheet and narrowing losses.

The Case for SoundHound Stock

SoundHound represents one of the most visible pure-play bets on conversational and agentic AI. The company’s technology powers voice and natural language interfaces across automotive systems, restaurants, IoT devices, financial services, healthcare and enterprise contact centers. Its Agentic+ framework, anchored by the Amelia platform, combines generative AI, multi-agent orchestration and deterministic workflows to deliver production-ready AI at scale.

Operational momentum has been strong. In the third quarter of 2025, SoundHound reported record revenues of $42 million, up 68% year over year, with non-GAAP gross margins of 59.3% reflecting the scalability of its software-centric model. Management raised full-year revenue guidance to $165–$180 million, highlighting accelerating adoption across verticals, including restaurants, automotive OEMs, financial institutions and healthcare providers.

SoundHound’s diversified customer base stands in sharp contrast to BigBear.ai’s government-heavy exposure. Deployments now span millions of endpoints globally, and the company continues to expand use cases such as voice commerce, smart answering and AI-driven customer service. Its balance sheet is also solid, with $269 million in cash and no debt at the end of the third quarter, providing flexibility to invest in growth and acquisitions.

Despite these strengths, SoundHound’s challenges are becoming more visible. GAAP net losses remain large, distorted by mark-to-market adjustments tied to acquisition-related earnouts, but even on a non-GAAP basis, profitability remains elusive. Adjusted EBITDA was a loss of $14.5 million in the third quarter, underscoring the continued need for scale to absorb operating costs.

How BBAI and SOUN Shares Have Performed

Over the past year, BigBear.ai stock has surged 153.7%, dramatically outperforming the Zacks Computers – IT Services industry, which declined 18.3%, as well as the broader Zacks Computer and Technology sector, up 26.2% and the S&P 500, up 16%. The rally reflects renewed confidence following balance sheet repair and the strategic pivot toward platform-driven growth.

By contrast, SoundHound stock is down 10.6% over the past year, lagging both the broader technology sector and the S&P 500, though it has performed slightly better than the sharply weaker industry. This divergence suggests that while SoundHound’s fundamentals are improving, investor enthusiasm has cooled amid valuation concerns and persistent losses.

BBAI Vs SOUN Performance (1-Year)

Image Source: Zacks Investment Research

Relative Valuation: Is Growth Priced In?

On a forward 12-month price-to-sales basis, BigBear.ai trades at 17.23X, roughly in line with the industry average of 17.07X. SoundHound trades at a higher 21.84X, reflecting expectations for faster revenue growth and margin expansion.

Given BigBear.ai’s recent revenue softness, the valuation gap signals that investors are already assigning a premium to SoundHound’s growth trajectory. However, that premium also raises downside risk if execution falters or estimate revisions turn less favorable.

BBAI Vs SOUN Valuation

Image Source: Zacks Investment Research

What Earnings Estimate Changes Signal

BigBear.ai’s earnings outlook has been improving. Over the past 30 days, the Zacks Consensus Estimate for its 2025 loss per share narrowed to 93 cents from $1.10, signaling confidence in operating discipline and the potential earnings impact of strategic initiatives. The Zacks Consensus Estimate for 2025 and 2026 revenues calls for a 16.1% decline but 30.2% growth, respectively.

For BBAI Stock

Image Source: Zacks Investment Research

SoundHound’s revision trend is more mixed. Over the past seven days, the consensus estimate for its 2025 loss per share widened to 13 cents from 9 cents, and the 2026 estimates narrowed to a 5-cent loss from an 8-cent loss. Revenue estimates call for a 99.7% increase in 2025 and 38.9% growth in 2026, but near-term volatility remains elevated.

For SOUN Stock

Image Source: Zacks Investment Research

Which AI Stock Is the Better Buy Now?

The contrast between BigBear.ai and SoundHound has become clearer as the AI investment cycle matures and investors place greater weight on balance sheet strength, estimate direction and durability of competitive positioning. BigBear.ai remains in a transition phase, with near-term revenue volatility and margin pressure tied to government program timing. However, its fortified cash position, sizable $376 million backlog, and the strategically important Ask Sage acquisition materially strengthen its long-term setup by accelerating a shift toward secure, recurring, platform-level revenue in a less crowded AI niche. Notably, earnings estimates for BigBear.ai — which currently carries a Zacks Rank #3 (Hold) — have been moving higher, signaling improving confidence in execution.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SoundHound, while delivering rapid revenue growth and attractive gross margins, faces a more challenging risk-reward balance. Losses remain elevated, valuation is stretched, and recent estimate revisions for 2025 have turned negative, raising downside risk if growth decelerates for this Zacks Rank #4 (Sell) company. Taken together, the current fundamentals support holding BigBear.ai stock, while SoundHound stock appears better suited as a sell at current levels.