BigBear.ai Gears Up to Post Q1 Earnings: Buy, Sell or Hold the Stock?

BigBear.ai Holdings, Inc. BBAI is scheduled to report first-quarter 2025 results on May 1, after the closing bell.

In the last reported quarter, BigBear.ai reported revenues of $43.8 million, which missed the Zacks Consensus Estimate by 19.1% but increased 8% year over year. The company’s bottom line in the fourth quarter was heavily impacted by non-cash charges—specifically, a $93.3 million hit from changes in derivative liabilities tied to the new 2029 convertible notes—resulting in a net loss of $108 million for the quarter.

This artificial intelligence (AI) provider surpassed earnings estimates in three of the trailing four quarters and missed on one occasion, with an average negative surprise of 30.7%. You can see the historical figures in the chart below. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

How Are Estimates Placed for BigBear.ai Stock?

The Zacks Consensus Estimate for the first-quarter earnings per share has remained unchanged at a loss of 6 cents over the past 30 days. The estimated figure indicates an improvement from the year-ago loss of 22 cents. The consensus mark for revenues is $35.9 million, suggesting an 8.4% year-over-year increase. For 2025, BBAI is expected to witness a 5.7% improvement from the 2024 level.

For 2025, BBAI is expected to register 80.9% bottom-line improvement from a year ago.

What the Zacks Model Unveils for BigBear.ai

Our proven model does not conclusively predict an earnings beat for BigBear.ai for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Earnings ESP: BBAI has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Influencing BigBear.ai’s Q1 Performance

BigBear.ai’s first-quarter performance is expected to have benefited from its solid backlog level and strengthened technology portfolio.

BigBear.ai operates in sectors that are set for continued investment both domestically and internationally — namely defense, border security, intelligence, and critical infrastructure. Demand for AI-driven solutions across these segments remains strong as governments prioritize national security and smart infrastructure projects. The company's positioning in these markets, combined with its growing reputation for delivering advanced AI capabilities, is expected to have contributed to its quarterly performance.

BigBear.ai is strengthening its market position through strategic collaborations with major companies like Amazon AMZN, Palantir PLTR and Autodesk ADSK. Amazon Web Services (AWS) has integrated BigBear.ai’s ProModel solution into AWS ProServe, enhancing logistics and warehousing operations with predictive AI capabilities. Palantir has partnered with BigBear.ai to expand its AI applications in defense and intelligence, reinforcing BigBear.ai’s credibility in mission-critical sectors. Additionally, Autodesk has adopted BigBear.ai’s technologies to advance its design and engineering platforms, highlighting BigBear.ai’s growing role in industrial automation and simulation.

Also, its focus on innovation and operational efficiencies is expected to contribute to its gross margin.

However, as the company’s revenues remain heavily reliant on government contracts, any delays in the commencement of new contracts create unpredictability around funding levels. Efforts to optimize government spending could delay new project starts, a headwind not unique to BigBear.ai but affecting all government suppliers. This remains a key risk factor for revenue consistency.

While BigBear.ai has not issued explicit first-quarter 2025 revenue or profitability guidance, the full-year 2025 guidance of $160 million to $180 million in revenue and negative single-digit millions in adjusted EBITDA suggests that early quarters could be characterized by ongoing investment and revenue recognition variability. The company’s focus in the first quarter will likely remain on maintaining delivery standards on existing contracts, advancing high-impact AI initiatives, and selectively investing in future growth areas while navigating federal funding complexities.

BBAI Stock Price Performance

BigBear.ai stock has gained 24.9% over the past month, outperforming the Zacks Computers - IT Services industry’s 1.9% increase and the Zacks Computer & Technology sector’s 1.2% rise.

BBAI stock is now trading at a 65.5% discount to its 52-week high of $10.36 and a premium of 206.4% to its 52-week low of $1.1650.

BBAI Stock’s 50-Day & 200-Day Moving Averages

BBAI stock is currently trading above the 200-day simple moving average (SMA) but below the 50-day SMA. This suggests that the long-term momentum is still bullish or at least not in a clear downtrend.

BBAI Stock’s Valuation

In terms of the forward 12-month price/sales (P/S), BBAI shares are currently overvalued, as suggested by its Value Score of F.

In terms of the forward 12-month price/sales (P/S), BBAI is trading at 5.92X, significantly higher than its median of 2.24X and the Zacks Computer and Technology sector’s 5.59X.

Why Should You Sell BBAI Stock Now?

While BigBear.ai has made notable strides in expanding its backlog and forming strategic partnerships with industry leaders like Amazon, Palantir, and Autodesk and positioning itself in growth sectors like defense, intelligence, and industrial automation, the near-term outlook presents significant concerns for investors.

The disappointing 2025 guidance, negative adjusted EBITDA expectations, and increasing reliance on uncertain government contracts amid a tough federal budget environment only add to the risk profile. Also, stretched valuation with consensus estimate pointing to continued losses and muted revenue growth raise concerns.

While the stock has rebounded off its lows and outperformed the sector in the past month, BigBear.ai is still operating under a cloud of operational risks, funding uncertainties, and an expensive valuation backdrop. Investors would be prudent to lock in recent gains and exit the stock before volatility around earnings potentially pressures it lower again.

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

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