Analysts See Upside for This Lesser-Known AI Stock by 2026. 1 Reason They Might Be Wrong

BigBear.ai (NYSE: BBAI) provides edge-based artificial intelligence (AI)-powered decision intelligence, predictive analytics, and mission-focused software solutions primarily to government customers supporting national security, supply chain management, digital identity, and other mission-critical use cases. The company operates in an AI niche that is distinct from those of the consumer-facing generative AI leaders or hyperscalers, and is less well-known than many AI giants.

However, several analysts are seeing significant upside potential in this stock.

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BigBear.ai has upside potential

Analysts are cautiously optimistic about BigBear.ai, and the 12-month consensus target price for the stock has been set at $6.67. The bullish target price estimates reach nearly $8, while the bearish ones are close to $5. With the stock last closing at $5.45 (as of Dec. 31, 2025), the consensus implies an upside potential of nearly 22%, while the high-end scenario hints at potential gains close to 45%.

BigBear.ai trades at 16.3 times sales, which seems rich compared to the tech-heavy Nasdaq-100's price-to-sales ratio of 6.77x. However, the company is still trading at a discount to prominent AI-focused companies, mainly due to revenue volatility and the absence of sustained profitability.

Analysts expect increasing AI adoption across national security, defense, intelligence, and homeland security, which is still in the early stages, to be a key growth catalyst for BigBear.ai. BigBear.ai stands to benefit from the increasing scale of these government programs, as it offers secure, mission-tailored AI solutions with real-time situational awareness and multi-domain decision support to solve real-world problems.

Another key factor for increasing optimism around BigBear.ai is its acquisition of Ask Sage, a secure, model-agnostic generative AI platform purpose-built to enable the deployment of AI models and agentic AI capabilities for government, defense, national security agencies, and other highly regulated environments. Ask Sage has a broad customer base, comprising nearly 16,000 government teams across 27 agencies, as well as hundreds of commercial enterprises. With annual recurring revenue expected to increase sixfold year over year to $25 million in 2025, the acquisition can improve BigBear.ai's revenue mix as well as improve its margin profile in the long run.

BigBear.ai also has a robust balance sheet, and exited the third quarter with $715 million in cash on its balance sheet. Hence, the company has the funding flexibility to invest in platform development while also handling near-term macroeconomic volatility in 2026.

One risk cannot be ignored

BigBear.ai's heavy reliance on the U.S. federal funding cycles, combined with an expanded cost structure, poses a meaningful risk to the optimistic thesis. Management highlighted that parts of several intelligence community contracts were temporarily paused during the 2025 government shutdown, resulting in a temporary loss of revenue and personnel. At the same time, selling, general, and administrative (SG&A) expenses rose, and gross margins suffered. If these challenges persist in 2026, then delayed revenue recognition coupled with higher costs can negatively affect overall investor sentiment for the company.

Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.