TLDR
- BigBear.ai (BBAI) stock crashed 32% after missing Q2 earnings expectations by a wide margin, losing 71 cents per share versus expected loss of 6 cents
- Revenue fell to $32.5 million, missing analyst estimates of $40.6-41.17 million and declining 18% year-over-year
- Company slashed 2025 revenue guidance from $160-180 million to $125-140 million due to federal contract disruptions
- CEO blamed government efficiency efforts affecting Army programs and data architecture consolidation for the poor performance
- Stock had surged nearly 500% over the past year before the earnings disaster, making the selloff more severe
BigBear.ai shares plummeted Tuesday morning after the AI software company delivered one of the worst quarterly misses in recent memory. The stock fell as much as 32.3% to $4.82 in early trading.
The company reported a second-quarter loss of 71 cents per share. Analysts had expected a much smaller loss of just 6 cents per share.
Revenue came in at $32.47 million for the quarter. This fell well short of analyst estimates ranging from $40.6 million to $41.17 million.
The revenue figure also represented an 18% decline from the same period last year. BigBear.ai had posted $39.8 million in revenue during Q2 2024.
CEO Kevin McAleenan pointed to federal budget cuts as the primary culprit. He said government efficiency efforts disrupted several key contracts during the quarter.
The Army programs took the biggest hit. McAleenan explained that the military branch is working to consolidate and modernize its data architecture.
This consolidation effort reduced volume on certain BigBear.ai contracts. The company depends heavily on government clients for revenue.
Revenue Guidance Slashed
The earnings miss was just the beginning of Tuesday’s bad news. BigBear.ai also withdrew its adjusted EBITDA guidance for 2025.
The company cited uncertainty around Army programs as the reason. It also expects higher spending in the coming quarters.
Full-year revenue guidance took a massive cut. The previous range of $160 million to $180 million dropped to $125 million to $140 million.
Analysts had been expecting around $167.95 million for the full year. The new guidance midpoint of $132.5 million represents a 21% cut from previous expectations.
McAleenan tried to strike an optimistic tone despite the results. He highlighted potential opportunities from recent federal legislation.
The CEO mentioned over $170 billion in supplemental funding for the Department of Homeland Security. Another $150 billion could flow to the Department of Defense for disruptive technology.
Analyst Response
HC Wainwright analyst Scott Buck maintained his Buy rating on the stock. However, he lowered his price target from $9 to $8.
The price target cut reflects the weaker near-term outlook. Buck’s target still implies upside from current levels.
BigBear.ai went public in 2021 through a SPAC merger. The company sells AI software to defense departments and other government agencies.
It also serves private industry clients. However, government contracts make up the bulk of its revenue stream.
The stock had been on a tear before Tuesday’s crash. Shares gained nearly 125% over the past three months.
Over the past year, the stock had surged close to 500%. This massive run-up may have set unrealistic expectations for the earnings report.
The company has struggled with profitability since going public. Its last positive earnings per share came back in 2023.
BigBear.ai closed Monday’s session at $7.09 per share. The after-hours selloff began immediately following the earnings release.
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