Why BigBear.ai Stock Is Cratering Today

Key Points

• BigBear.ai missed big in its second quarter as sales fell significantly.

• Management cut full-year revenue guidance as federal contracts are delayed or downsized.

• With continued losses, shrinking revenue, and a meaningful debt load, BigBear.ai looks risky.

• 10 stocks we like better than BigBear.ai ›

Shares of BigBear.ai (NYSE: BBAI) are falling hard on Tuesday, down 20% as of 1:36 p.m. ET. The drop comes as the S&P 500 and Nasdaq Composite has gained 0.9% and 1.1%, respectively.

The defense-focused artificial intelligence company reported its second-quarter earnings Monday after market close, falling well short of Wall Street's expectations.

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BigBear.ai Q2 earnings collapse

BigBear reported a $0.71 loss per share on $32.5 million in revenue, missing analyst forecasts by a wide margin and representing an 18% year-over-year loss. Consensus estimates for the quarter had been for a $0.06 loss on $40.6 million in revenue.

The company also lowered its full-year revenue guidance to between $125 million and $140 million, down significantly from the previous range of $160 million to $180 million. CEO Kevin McAleenan cited disruptions in the company's federal contracts as the primary cause, though he did point to future contract growth potential from newly authorized Department of Homeland Security (DHS) funding.

Image source: Getty Images.

While the big tech firms like Microsoft and Alphabet that power AI had blowout recent quarters, BigBear is the latest end-user AI company to show weakness. C3.ai also missed expectations by a mile, though Palantir still continues to fire on all cylinders.

BigBear.ai remains a risky bet

BigBear's sales trajectory is concerning, and its losses are growing. The company has a non-negligible amount of debt already and negative cash flows. Despite this, the stock still carries a hefty premium, granted not nearly as high as Palantir's, but still significant for its current sales and earnings trajectories. I would avoid the stock.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, and Palantir Technologies. The Motley Fool recommends C3.ai and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.