There are reasons to be bullish about BigBear.AI (BBAI), but there are also reasons to be cautious. On the positive side of the ledger, the company looks well-positioned to benefit from the enthusiasm for advanced technology in general and AI in particular among government agencies and companies. What’s more, its backlog is growing rapidly and a major investor, in a bullish sign for the name, recently exercised its warrants on the company’s stock while also obtaining new warrants.
On the other hand, BBAI’s revenue growth was not very impressive in the first quarter of the year, while it has a fairly large amount of long-term debt and a high amount of its shares are being sold short.
All in all, I believe that investors should keep an eye on the shares and consider buying them if the stock drops considerably and/or if the firm’s revenue growth meaningfully accelerates.
Well-Positioned to Get a Big Boost From Enthusiasm About AI
When it comes to the government, BBAI already has major footholds, as it has obtained a significant number of deals with Washington just in 2025, and its CEO’s impressive resume should enable it to make much more progress in this area. The firm’s Pangiam unit provides computer vision and security detection systems to Customs and Border Protection (CBP) and the Department of Homeland Security.
Additionally, in May BBAI announced that it was partnering with another AI company, Hardy Dynamics, to conduct research on AI for the Pentagon, The two firms are looking to “develop next-generation AI technologies to enable secure, resilient communication and coordination among” drones. In April, BBAI disclosed that it would provide “its AI/ML-powered heavy manufacturing planning and production platform” to Austal USA. The latter firm is, according to BBAI, “one of the largest shipbuilders in the United States, and a module supplier for U.S. Navy submarines.” And finally, in January, the company obtained a prime Indefinite Delivery/Indefinite Quantity (IDIQ) deal to provide engineering and technology to the U.S. Navy.
BBAI’s CEO, Kevin McAleenan, was Acting Secretary of the U.S. Department of Homeland Security during President Donald Trump’s first term, and he also served as Commissioner of U.S. Customs and Border Protection.
With the Trump administration expressing enthusiasm about AI and Defense Secretary Pete Hegseth in particular embracing the technology, BBAI should be able to leverage its connections in the government and McAleenan’s former associates in Washington to obtain many more deals going forward.
Meanwhile, many companies in the private sector are looking to utilize AI in order to reduce their costs, and BBAI’s technology has been validated to some extent in this area. For example, the firm has partnered with a UAE-based company to use AI to support the “digital transformation” of the country and its region. And in May 2024, it announced a deal to incorporate its modeling and simulation software into a supply chain-optimization product.
Impressive Backlog Growth and a Bullish Move by a Major Investor
As of the end of the first quarter, BBAI’s backlog had jumped 30% versus the same period a year earlier to a rather large $385 million. The surge suggests that BBAI has been making many deals that should show up as revenue over the longer term.
And in February 2025, a major investor showed a great deal of faith in BBAI stock by fully exercising its warrants on the company’s shares to purchase up to 5.8 million units of BBAI. The investor also obtained a new warrant that allowed it to buy up to 3.77 million additional shares.
Revenue Growth, High Debt, and Elevated Short Positions
In the first quarter, the company’s revenue increased just 5% versus the same period a year earlier to $34.8 million. Meanwhile, as of the end of Q1, the firm’s current liabilities and its long-term debt amounted to a combined $190 million, while it had $107.6 million of cash and cash equivalents. That means its current liabilities and its long-term debt combined are worth nearly $83 million more than its cash and cash equivalents. That’s a large differential for a firm that generated revenue of $34.8 million in Q1 and whose operating cash flow for the 12 months that ended in March came in at -$30.4 million.
In light of this data, I think it’s possible that the company may have to sell more shares to stay in business in the medium term, putting downward pressure on its stock price. If the market is very excited about a company’s stock because its revenue is growing very quickly, there’s a good chance that it can sell shares without denting the stock price much. But with BBAI’s revenue not yet expanding quickly, its stock price could sink sharply if it sells new shares.
Also noteworthy is that 27% of the company’s floated shares were being shorted recently. As is well-known, a stock can soar very quickly if a large percentage of its float is being shorted. But in my experience, it can also be very difficult for a stock to overcome the efforts of short sellers to prevent it from rising.
*This article is intended to be informational only; it is not financial advice.
