This Palantir Rival Could Soar 36% in a Year, According to Wall Street. Is It a Buy Right Now?
Key Points
BigBear.ai is forecasting an improvement in its financial performance in 2026.
However, the company's gains will be driven by a recent acquisition.
BigBear.ai is trading at a premium to the Nasdaq Composite's sales multiple, and it needs to outperform Wall Street's expectations to deliver the gains analysts anticipate.
Artificial intelligence (AI) software giant Palantir Technologies has endured a difficult time on the stock market in 2026, losing 30% of its value as of this writing, and that's despite the impressive growth that it has been clocking due to the fast-growing demand for its generative AI software solutions.
Palantir's valuation has been the primary reason behind its underperformance. However, shares of BigBear.ai Holdings (NYSE: BBAI), which are significantly cheaper than Palantir, have met with the same fate. Like Palantir, BigBear.ai also offers AI tools that enterprises and business customers can use to make decisions and predict outcomes. The company's solutions are used in border security, defense and intelligence, and supply chain applications.
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However, BigBear.ai stock is down 37% so far this year. However, its 12-month median price target of $5 points to potential upside of 36%. So, should investors consider buying this beaten-down stock in anticipation of a turnaround? Let's find out.
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BigBear.ai's financial performance is improving in 2026
BigBear.ai had a forgettable 2025. Its revenue fell by 19% last year to $127.7 million. Additionally, the company's gross margin fell by 17 percentage points in the fourth quarter last year due to low-margin contracts.
BigBear.ai notes that the majority of its revenue comes from federal government contracts. As a result, its revenue is dependent on the timing of government contracts, their funding, and budgets. The company's revenue decline clearly indicates that these factors can severely impact it. However, BigBear.ai has gotten off to a much better start in 2026.
Its revenue dropped just 1% in Q1 to $34.4 million. What's more, the company's gross margin increased by almost 13 percentage points to 34%. However, the improved performance was driven by the contribution from Ask Sage, which BigBear.ai acquired in December 2025. BigBear.ai spent $250 million on this acquisition to enhance its presence and capabilities "across defense, intelligence, and other highly regulated environments."
BigBear.ai notes that Ask Sage's generative AI products and software platforms have higher margins. So, the company seems well-placed to deliver a stronger margin performance in 2026. Also, BigBear.ai recorded new contract wins worth almost $75 million in Q1. This encouraged management to maintain its full-year revenue forecast of $135 million to $165 million, with the midpoint implying a 17% jump in its top line this year.
Will BigBear.ai's improving growth profile translate into stock price upside?
BigBear.ai's turnaround seems primarily driven by its acquisition of Ask Sage. So, it remains to be seen whether the company can sustain its momentum in 2027 once the inorganic boost from Ask Sage fades.
Analysts are projecting $159 million in revenue for BigBear.ai next year, indicating that its top-line growth could slow to mid-single digits. Given that this AI stock is trading at 12 times sales, a significant premium to the tech-laden Nasdaq Composite index's sales multiple of 5.4, it needs to do much better to justify its premium.
So, even though the median price target points to a nice jump in BigBear.ai's stock price, the expensive valuation and slow growth could continue to weigh on its shares. That's why investors should consider investing in other fast-growing AI niches, as it seems too early to bet on a turnaround at BigBear.ai.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
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