Palantir vs. BigBear.ai: A Comparison of Two AI Giants

Palantir (NASDAQ: PLTR) and BigBear.ai (NYSE: BBAI) are key players in the enterprise AI software market, focusing on data analysis for large organizations. Palantir, which went public through a direct listing in September 2020, has grown into a significant firm that serves major U.S. government agencies and large corporate clients.

In contrast, BigBear.ai, smaller in size and listed after merging with a special purpose acquisition company (SPAC) in December 2021, creates modular AI tools that integrate with an organization’s existing software. In late 2021, it incorporated its “observe, orient, and dominate” modules into Palantir’s platform.

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Since their initial public offerings, Palantir and BigBear.ai have followed divergent paths in the market. Palantir’s stock opened at $10 and now trades at nearly $120, demonstrating significant growth. Conversely, BigBear.ai debuted at $9.84 but currently trades around $9. Let’s explore what has led to Palantir’s strong performance and whether it remains the more attractive investment choice.

Comparing Palantir and BigBear.ai

Palantir offers two primary data mining platforms: Gotham, serving government clients, and Foundry, catering to enterprise users. Gotham collects data for major agencies such as the CIA, NSA, and FBI, while Foundry undertakes similar tasks for corporations like Morgan Stanley and Airbus.

The company collects data from various sources, identifies trends, and organizes it to support better decision-making for clients. In 2024, Palantir reported revenues with 37% coming from commercial customers and 63% from government clients. Notably, its commercial segment is growing at a faster pace compared to the government sector, which can see variability based on contract timings.

Co-founder and CEO Alex Karp anticipates that U.S. commercial customers will drive short-term growth as they enhance their AI and analytics capabilities. Additionally, ongoing geopolitical tensions in Europe and the Middle East may propel demand for its services.

On the other hand, BigBear.ai integrates its analytics modules into existing software rather than replacing it. These modules can operate on edge networks, which process data flow efficiently, making BigBear.ai an appealing option compared to larger, more integrated cloud platforms.

In March, BigBear.ai acquired Pangiam, a company specializing in AI vision technology. Kevin McAleenan, formerly a U.S. government official, took over as CEO in January, succeeding Mandy Long.

Assessing Growth Rates of Both Companies

Palantir achieved a revenue increase of 17% in 2023 and 29% in 2024. This growth resulted from a favorable economic environment, expanding U.S. commercial business, and acquiring new government contracts. The company became profitable under generally accepted accounting principles (GAAP) in 2023 and saw its GAAP earnings per share (EPS) more than double in 2024.

Its successful performance led to Palantir’s inclusion in the S&P 500 last September, and the Nasdaq 100 in December, solidifying its status as a blue-chip technology leader. For 2025, Palantir forecasts a revenue growth of 31%, while analysts predict a 63% increase in GAAP EPS.

In contrast, BigBear.ai’s revenue growth has been less impressive, rising only 6% in 2022 and remaining flat in 2023. This stagnation is attributed to various challenges, such as market conditions and the bankruptcy of its largest client, Virgin Orbit.

For 2024, BigBear.ai anticipates revenue growth between 6% and 16% as it integrates Pangiam and seeks additional government contracts. In 2025, analysts estimate revenue growth of around 12% based on the middle of this forecast.

Some believe that McAleenan’s extensive government ties could help secure future contracts for BigBear.ai. Notably, although it has landed a major $165 million automation contract with the U.S. Army, the revenue from this deal will be spread out over five years, and other partnerships have yet to yield significant financial returns. BigBear.ai remains deeply unprofitable on a GAAP basis, but analysts predict adjusted EBITDA could turn positive by 2025.

Investment Value: Which Stock Holds More Promise?

Despite Palantir’s accelerating revenue growth and rising profits, it is currently valued at 385 times its forward GAAP earnings and 70 times its projected sales for 2025. Such high valuations might lead to substantial declines if the market experiences a downturn. BigBear.ai, while not a bargain either, stands at 13 times its projected sales this year. Given the current market conditions, I would advise against investing in either stock due to their elevated valuations.

However, if forced to choose, I would lean toward BigBear.ai rather than Palantir. Though Palantir is a strong company in the AI sector, investors should be wary of overpaying. Palantir’s stock could lose half its value in the coming weeks while still being seen as overpriced when considering its growth potential.

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Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Palantir Technologies. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.