BigBear.ai (BBAI), the defense-focused AI firm, saw its stock slide over 5% in after-hours trading Tuesday after reporting a wider-than-expected loss for the first quarter. While the company managed to edge past revenue estimates, investors seem to be disappointed by rising operational costs and weak profit trends.
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Rising Losses Weighed on the Stock
The biggest concern for investors was the earnings miss. BigBear.ai reported a loss of $0.12 per share, wider than analysts’ expectations for a loss of $0.08 per share.
At the same time, the company’s operating costs increased sharply. Selling, general, and administrative expenses rose to $29.2 million from $22.7 million a year ago. The increase was mainly linked to the integration of the Ask Sage acquisition, along with higher legal and marketing expenses.
Flat Revenue Growth Raises Concerns
BigBear.ai reported revenue of $34.4 million, slightly above estimates. However, sales were still down 1% from $34.8 million in the same quarter last year.
That weak growth stood out at a time when investors expect AI companies to deliver strong expansion. Earlier this week, Palantir (PLTR), the data analytics and AI software company, reported 85% year-over-year revenue growth, highlighting the strong demand for enterprise AI products.
For BigBear.ai, growth from newer generative AI products was offset by weaker activity in older Army-related programs, suggesting the company is still trying to build stronger momentum in the fast-growing AI market.
Some Bright Spots Still Remain
Despite the sell-off, there were a few positive signs in the report. Gross margins improved to 34% (up from 21.3% last year), showing that BigBear.ai is shifting more toward higher-margin software work instead of lower-margin consulting services.
The company’s backlog also increased to $281.9 million, supported by a new classified contract worth $53 million. This suggests BigBear.ai continues to maintain a solid position in the national security and defense market, even as investors remain focused on near-term losses and slower growth.
Is BBAI Stock a Buy Now?
Overall, Wall Street has a Moderate Buy consensus rating on BigBear.ai stock based on two Holds and one Buy. The average BBAI stock price target of $5.33 indicates about 29% upside potential.
