Shares of BigBear.ai Holdings Inc. (BBAI) declined approximately 5% to $4.16 in Friday afternoon trading, as the defense-focused artificial intelligence company reported first-quarter results that failed to excite investors. The stock slide reflects ongoing skepticism about the firm's revenue trajectory amid a mixed earnings report.
The McLean, Virginia-based company posted first-quarter revenue of $34.4 million, essentially flat compared to $34.8 million in the same period last year. The slight dip was attributed to lower Army program volumes, partially offset by contributions from Ask Sage, a generative AI platform that BigBear.ai acquired late last year. Ask Sage generated approximately $6.1 million in revenue during the quarter, though it posted a net loss of about $551,000.
On the positive side, BigBear.ai's backlog climbed 14% sequentially to $281.9 million, driven largely by a $53 million sole-source classified prime contract. This award was made directly to the company without competitive bidding, underscoring its strategic position in defense and intelligence markets. However, management cautioned that backlog does not guarantee future revenue, as many federal contracts are only partially funded at award and can be canceled for convenience.
Gross margin improved significantly to 34.0% from 21.3% a year earlier, a gain that Chief Financial Officer Sean Ricker attributed to higher-margin generative AI revenue. Despite this, the company's adjusted EBITDA loss widened to $9.9 million from $7.0 million, reflecting continued investment in growth initiatives. Net loss narrowed to $56.8 million from $62.0 million.
BigBear.ai maintained its full-year 2026 revenue guidance of $135 million to $165 million, signaling management's confidence in its pipeline. Chief Executive Kevin McAleenan highlighted that first-quarter contract wins of nearly $75 million support the company's revenue plan. The company ended the quarter with $431.5 million in cash and investments, having retired $124.6 million of its 2029 convertible notes, leaving only $16.5 million in 2026 notes to be settled this year.
BigBear.ai operates in a competitive landscape dominated by larger players like Palantir Technologies (PLTR) and C3.ai (AI), both of which have secured significant government contracts. Palantir recently deepened its partnership with Ukraine for battlefield data analysis, while C3.ai continues to push its defense-focused AI solutions. BigBear.ai's smaller scale and slower revenue growth have left it somewhat overshadowed in the AI defense hype cycle.
Investors remain cautious about the company's ability to convert its growing backlog into consistent revenue. The stock's decline suggests that the market is looking for more tangible proof of commercial traction beyond contract wins. With a strong cash position and improving margins, BigBear.ai has resources to weather near-term challenges, but the path to profitability remains uncertain.
