Last Update 06 Feb 26

BBAI: Execution On Government Contracts Will Shape 2025 Revenue Outlook

Narrative Update on BigBear.ai Holdings

Analysts have trimmed their price target on BigBear.ai to US$6 from US$7, citing pressured near term fundamentals after a 20.1% revenue decline in Q3 and ongoing execution risk tied to lumpy government contracts that continue to weigh on margins and operating results.

Analyst Commentary

Recent research points to a more cautious stance on BigBear.ai, with the rating shifted to Neutral and the price target cut to US$6 from US$7. The key debate for you as an investor centers on how quickly the company can steady its government related revenue and improve execution.

Bullish Takeaways

Bullish analysts see the revised US$6 price target as resetting expectations closer to current fundamentals, which can reduce the risk of overly optimistic forecasts being priced in.
The current focus on execution around government contracts is viewed as an opportunity to tighten cost controls and contract discipline, which could support margins if management delivers.
Some investors may view the 20.1% Q3 revenue decline as already reflected in the lower rating and target, which can limit incremental downside purely from this data point.
The explicit acknowledgment of lumpy government revenue encourages closer monitoring of contract wins and renewals, giving shareholders clearer markers to track progress over time.

Bearish Takeaways

Bearish analysts highlight that near term fundamentals remain pressured, with the 20.1% year over year revenue decline in Q3 tied to federal program disruptions that have not yet been fully resolved.
Ongoing dependence on lumpy government contracts introduces uncertainty around quarterly results, which can keep the valuation under pressure and make earnings less predictable.
Continued operating losses and margin pressure are seen as key execution risks, raising questions about how quickly the business can move toward a more sustainable financial profile.
The downgrade to Neutral signals reduced confidence in the risk reward setup at previous target levels, with analysts preferring to see clearer evidence of contract stability and margin improvement before taking a more positive stance.

What's in the News

BigBear.ai’s UAE business agreed a partnership with Maqta Technologies, part of AD Ports Group, to co-develop AI driven customs and border operations solutions for government authorities and port operators worldwide. The partnership aims to speed cargo processing and improve detection of contraband at ports and border crossings (Key Developments).
The company opened its first Middle East office at the World Trade Center Abu Dhabi. It described this as part of a long term investment in the region and linked it to recent partnerships with Vigilix and Easy Lease, both owned by International Holding Company (Key Developments).
BigBear.ai entered a partnership with C Speed, integrating its ConductorOS AI orchestration platform with C Speed’s LightWave Radar to support real time threat detection and decision support for defense and homeland security customers, including counter UAS missions (Key Developments).
The company announced a partnership with the Kraft Group, including work with International Forest Products LLC to improve supply chain transparency using AI enabled insights, and a marketing partnership as an Official Sponsor of the New England Patriots (Key Developments).
BigBear.ai issued revenue guidance for the year ended 31 December 2025, projecting revenue in a range of US$125m to US$140m (Key Developments).

Valuation Changes

Fair Value: Model fair value per share remains unchanged at 6.67x. This indicates no adjustment in the central valuation output.
Discount Rate: The discount rate has fallen slightly from 9.10% to 8.83%. This implies a modest reduction in the required return used in the model.
Revenue Growth: The revenue growth assumption is effectively unchanged at about 7.15%, with only an immaterial rounding difference in the updated figure.
Net Profit Margin: The net profit margin input has risen slightly from 6.98% to 6.99%, reflecting a very small tweak to profitability assumptions.
Future P/E: The future P/E multiple estimate has edged down from 373.58x to 370.29x. This keeps the implied earnings multiple at a very high level in the model.

Strategic focus on international expansion and regional partnerships aims to boost revenue and global presence through successful pilots and enduring programs.
Targeting defense and security sectors, alongside AI-driven solutions and acquisitions, could support sustainable growth and improved margins.
Revenue variability and high costs due to government delays and necessary R&D investments could negatively impact margins and overall financial performance.

Catalysts

About BigBear.ai Holdings

Provides artificial intelligence-powered decision intelligence solutions.What are the underlying business or industry changes driving this perspective?

BigBear.ai plans to expand internationally by converting successful pilots into enduring programs and building regional partnerships with leading companies, potentially increasing revenue and global market presence.
The company is focused on business alliances and strategic acquisitions, which could drive faster innovation and open new revenue streams by accessing additional markets and technologies.
BigBear.ai is targeting opportunities in defense, security, and infrastructure, capitalizing on increased federal spending and shifting procurement practices towards efficiency and advanced commercial technologies, potentially boosting revenue and long-term contracts.
With a healthy backlog of $385 million and increased emphasis on multiyear programs, BigBear.ai is positioned to build a stable revenue stream, supporting sustainable growth and improved net margins.
Continued investment in AI-driven solutions and leveraging proprietary technologies like Pangiam, veriScan, and ConductorOS can enhance product offerings, driving efficiency gains and supporting potential increases in gross profit margins.

BigBear.ai Holdings Earnings and Revenue Growth

BigBear.ai Holdings Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming BigBear.ai Holdings's revenue will grow by 2.1% annually over the next 3 years.
Analysts are not forecasting that BigBear.ai Holdings will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate BigBear.ai Holdings's profit margin will increase from -291.0% to the average US IT industry of 6.4% in 3 years.
If BigBear.ai Holdings's profit margin were to converge on the industry average, you could expect earnings to reach $10.3 million (and earnings per share of $0.02) by about September 2028, up from $-443.9 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 330.8x on those 2028 earnings, up from -4.1x today. This future PE is greater than the current PE for the US IT industry at 32.4x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.89%, as per the Simply Wall St company report.

BigBear.ai Holdings Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company's revenue is reported as being lumpy, meaning it can fluctuate significantly depending on the timing of contract awards and milestone achievements, posing a risk to consistent revenue streams.
Delays in government procurement and funding can create temporary variability and excess resource capacity, potentially affecting revenue and margins in the short term.
The company has faced significant noncash losses, including those related to the increase in fair value of derivatives, which could affect net margins and earnings.
Increased R&D expenses, as well as higher recurring SG&A costs due to government funding delays, contribute to negative adjusted EBITDA, impacting overall earnings.
The necessity to continually invest in R&D and technology while managing government delays and funding could strain resources and impact net margins if efficiencies are not achieved.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $5.833 for BigBear.ai Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $8.0, and the most bearish reporting a price target of just $3.5.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $162.2 million, earnings will come to $10.3 million, and it would be trading on a PE ratio of 330.8x, assuming you use a discount rate of 8.9%.
Given the current share price of $4.9, the analyst price target of $5.83 is 16.0% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

International Expansion And Alliances Will Shape Our Future