AI Defense Revolution: Investors Flock to BigBear.ai and Palantir
Companies that combine cutting-edge analytics with mission-critical contracts are finding opportunities as artificial intelligence (AI) transforms the defense and national security scene. BigBear.ai (BBAI) and Palantir Technologies (PLTR) are two of the industry leaders. Their size, financial standing, and methods of execution are very different. This presents investors with both special potential and concerns, even though both are well-positioned to benefit from the AI-defense trend.
Can BigBear.ai Turn Defense AI Innovation Into Profits?
With products like Shipyard AI (supply chain security), ConductorOS (autonomous command and control), and veriScan (biometric identity), BigBear.ai has become a dynamic defense-focused AI startup. With a focus on border technology, biometrics, and defense autonomy, the company is well-positioned to benefit from the $300 billion “OB3” defense budget bill.
BigBear.ai‘s balance sheet has improved financially, with $391 million in cash and a net positive position over debt. It has flexibility for growth and M&A because of its cash. Execution risks still exist, though. Revenue for the second quarter of 2025 fell 18% year over year to $32.5 million, while net losses increased as a result of goodwill impairment. Because of its reliance on a small number of large transactions, volatility is unavoidable. Investor confidence in BBAI’s long-term growth potential is reflected in the company’s remarkable 79.1% year-to-date jump.
Palantir Hits $1B Quarterly Revenue as Defense AI Dominance Grows
Palantir, on the other hand, has made a name for itself as a major force in AI with strong connections to both government and private customers. For the first time, Palantir’s quarterly sales surpassed $1 billion in Q2 2025, with government revenue increasing 53% and U.S. commercial revenue jumping 93% year over year. Its status as a defense AI cornerstone is solidified by a historic 10-year, $10 billion deal with the U.S. Army.
Palantir blends profitability and hypergrowth, in contrast to BigBear.ai. With adjusted free cash flow of $569 million and margins above 50%, it has now achieved GAAP profitability for eight straight quarters. Palantir’s $6 billion financial reserves give it the durability and firepower to grow internationally. Only valuation is a significant disadvantage. PLTR trades at a high premium to BBAI and the larger tech sector, at 83x projected earnings. However, its prominence, size, and established position in the use of AI in government and business make it a more trustworthy compounder for long-term investors.
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