BigBear.ai Holdings, Inc. BBAI appears to be making early progress in shifting its business toward higher-margin AI platforms and products, a trend that could support stronger profitability in 2026. While first-quarter 2026 revenues were nearly flat year over year at $34.4 million, the company delivered a major improvement in gross margin, highlighting the impact of its evolving revenue mix.
Gross margin expanded sharply to 34% in the first quarter from 21.3% a year ago, driven largely by increased contributions from generative AI platforms and products tied to the Ask Sage acquisition completed at the end of 2025. Management noted that the company is increasingly shifting from lower-margin services work toward technology-oriented contracts, particularly in national security and trade-and-travel markets.
The momentum in Ask Sage is particularly encouraging. During the quarter, BigBear.ai secured new generative AI-related wins with NASA, the Army Intelligence and Security Command and the Naval Research Lab. The company also launched a broader commercial version of Ask Sage, expanding beyond government customers into critical infrastructure and defense-industry markets.
At the same time, BigBear.ai’s backlog rose 14% sequentially to $281.9 million, supported by a $53 million classified intelligence contract and multiple airport and shipyard-related AI deals.
However, profitability challenges remain. Adjusted EBITDA loss widened year over year due to higher R&D and go-to-market investments. Still, if BigBear.ai continues increasing the share of software, GenAI and platform revenues, margin expansion could become a much bigger part of the company’s growth story in 2026.
BigBear.ai Faces AI Platform Giants
BigBear.ai operates in a competitive AI and defense technology landscape where profitability is increasingly tied to software-driven revenues, scalable platforms and recurring AI contracts. Two major competitors relevant to BigBear.ai’s margin improvement strategy are Palantir Technologies PLTR and C3.ai AI.
Palantir remains a formidable player in government and defense AI. It has developed a highly scalable software-centric model focused on AI platforms, advanced data analytics and mission-critical solutions for defense and intelligence customers. Its ability to generate higher-margin platform revenues reflects the direction BigBear.ai is pursuing through Ask Sage and other generative AI offerings. Palantir also benefits from greater scale, expanding commercial adoption and long-standing government ties, intensifying competition in the national security AI market.
C3.ai is another important competitor in enterprise and federal AI applications. The company continues to expand its scalable AI software and agentic AI capabilities across industrial and government sectors. However, C3.ai still faces profitability challenges due to high operating expenses and continued investments in growth initiatives. While BigBear.ai is focusing on specialized mission-oriented AI deployments and operator-centric solutions, C3.ai benefits from broader enterprise exposure and a larger customer footprint.
BBAI Stock’s Price Performance & Valuation Trend
Shares of BBAI have trended 25.2% upward in the past month, outperforming the Zacks Computers - IT Services industry, as shown below.
BBAI’s 1-Month Price Performance
Image Source: Zacks Investment Research
BBAI stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-sales (P/S) ratio of 13.89, as evidenced by the chart below.
BBAI’s P/S Ratio (Forward 12-Month) vs. Industry
Image Source: Zacks Investment Research
EPS Trend of BBAI
Over the past 30 days, expectations for the company’s 2026 loss per share remained unchanged at 30 cents. However, the estimate still indicates an improvement from the loss of 82 cents reported in 2025.
Image Source: Zacks Investment Research
BigBear.ai currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).