2 AI Defense Stocks Soar 30%+ in 2025, Poised for More in 2026

With the rise of artificial intelligence (AI), a plethora of tech stocks have surged in value this year. Two prominent names are Palantir Technologies Inc. PLTR and BigBear.ai Holdings, Inc. BBAI, with respective stock gains of 156.7% and 35.5% in 2025. 

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Both are defense-focused, with Palantir the larger, more established AI-driven defense and enterprise software stock, while BigBear.ai is smaller and considered a more speculative AI-defense stock. However, both companies have strong growth potential, making them compelling buys for the upcoming year. Let’s take a closer look.

Reasons to Be Bullish on Palantir 

For quite some time, Palantir relied on government contracts to sell its products. However, Palantir’s Artificial Intelligence Platform (AIP) has gained popularity among both U.S. commercial clients and the government segment. As a result, Palantir reported substantial revenue growth in the last quarter. For the third quarter, Palantir’s revenues came in at $1.18 billion, up 63% year over year and 18% quarter over quarter, according to investors.palantir.com. 

Revenues from the U.S. commercial client segment were $397 million, marking a 121% year-over-year increase and a 29% rise sequentially. Meanwhile, revenues from the government segment totaled $486 million, up 52% from the previous year and 14% quarter over quarter. 

The growing demand for AIP also led the company to raise its fourth-quarter sales guidance to between $1.327 billion and $1.331 billion, and for the full fiscal year to between $4.396 billion and $4.400 billion. The company remains confident about profitability, expecting positive GAAP operating income and net income in every quarter this year. 

Additionally, the increase in the U.S. commercial client base is expected to fuel growth next year, while the increase in government contracts will create a strong barrier to entry. Thus, Palantir’s expected earnings growth rate for the next year is a solid 42.5%. 

Reasons to Be Bullish on BigBear.ai 

At the onset of 2025, the Trump administration’s willingness to boost growth in the technology field helped BigBear.ai’s shares climb northward. But afterwards, Trump’s move to cut federal spending impacted BigBear.ai’s share price, and its revenues plunged 20% year over year to $33.1 million in the third quarter. This followed an 18% year-over-year decline to $32.5 million in the second quarter, as cited by ir.bigbear.ai. 

However, concerns related to the decline in sales are on the back burner, especially after BigBear.ai’s definitive deal to acquire Ask Sage for $250 million. This is because Kevin McAleenan, CEO of BigBear.ai, believes that “by integrating Ask Sage with BigBear.ai, we are creating what the market has been asking for: a secure, integrated AI platform that connects software, data, and mission services in one place.” 

Ask Sage is a fast-growing generative AI platform designed for AI deployment in defense and national security. Some of the prominent agencies adopting Ask Sage are the U.S. Space Force and the Defense Health Agency. 

BigBear.ai now expects its revenues to accelerate and has raised its full-year sales outlook to between $125 million and $140 million. Additionally, BigBear.ai is financially strong, with a record cash position of $456.6 million as of Sept. 30, 2025, providing the company with sufficient funds to pursue growth initiatives. Therefore, BigBear.ai’s projected earnings growth rate for the next year is a stellar 73.1%. 

Both BigBear.ai and Palantir carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

 

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

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