Will M&A Acceleration Transform BigBear.ai Into a Scaled AI Leader?

BigBear.ai Holdings, Inc. BBAI is leaning on mergers and acquisitions (M&A) as a strategic lever to scale its AI footprint. With second-quarter 2025 revenue down 18% year over year to $32.5 million and adjusted EBITDA slipping to negative $8.5 million, organic growth alone may not be enough to capture the wave of AI adoption sweeping defense, security, and logistics markets.

The recently passed One Big Beautiful Bill (OB3) provides a historic tailwind. With $170 billion allocated to the Department of Homeland Security, $150 billion to the Department of Defense, and $29 billion for shipbuilding, funding is directly targeting areas where BigBear.ai has capabilities in biometrics, defense autonomy, and supply chain solutions. Management has made clear that M&A will be central to capturing this opportunity—seeking targets that can accelerate scale, unlock new markets, and add differentiated AI capabilities.

Financial flexibility underpins this strategy. BigBear.ai exited the second quarter with a record $391 million in cash and a net positive cash position of $250 million, giving it firepower for acquisitions without overextending its balance sheet. The company has already proven adept at capital raising, securing $293 million through at-the-market offerings at favorable prices.

Still, risks remain. Execution on integration will be critical, especially as larger rivals like Palantir and C3.ai are also expanding their defense AI offerings. With near-term revenue guidance lowered to $125–$140 million, investors must weigh whether BigBear.ai’s pivot to aggressive M&A can offset contract disruptions and drive sustainable profitability.

If management can successfully identify and integrate targets aligned with OB3 priorities, BigBear.ai may yet transform into a scaled AI leader—though investors should brace for volatility along the way.

Competitors in the Race for AI Scale

As BigBear.ai turns to M&A to accelerate scale, investors must also weigh how competitors like Palantir Technologies PLTR and C3.ai AI are approaching growth. 

Palantir has already cemented itself as a leader in government AI contracts, leveraging its Gotham and Foundry platforms across defense, intelligence, and homeland security. Palantir is less dependent on M&A, instead growing through deep, long-term partnerships and multi-year government agreements that provide predictable cash flows.

C3.ai, by contrast, has taken a broader commercial and government approach, emphasizing its enterprise AI suite. C3.ai continues to expand through partnerships with hyperscalers and industry-specific applications, targeting everything from defense logistics to energy optimization. Unlike BigBear.ai, which is relying on acquisitions to achieve scale, C3.ai is leveraging platform breadth to grow its footprint.

Against this backdrop, BigBear.ai must prove that strategic M&A can create sustainable differentiation versus the organic growth engines of Palantir and C3.ai.

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This article originally published on Zacks Investment Research (zacks.com).

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