BigBear.ai (BBAI 7.17%), a developer of artificial intelligence (AI) modules for edge networks, went public through a merger with a special purpose acquisition company (SPAC) four years ago. It started trading at $9.84 on its first day, but it now trades at less than $7.
Before BigBear.ai went public, it predicted its revenue would surge from $182 million in 2021 to $550 million in 2024. Unfortunately, its revenue only rose from $146 million in 2021 to $158 million in 2024, as it dealt with the bankruptcy of its top customer, Virgin Orbit, intense competition from similar AI module makers, and macroeconomic headwinds.
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To grow again, BigBear.ai acquired the AI vision company Pangiam in early 2024. It also appointed Pangiam’s CEO, Kevin McAleenan -- who previously served as the Acting Secretary of the Department of Homeland Security (DHS) -- as its new CEO.
McAleenan’s appointment sparked some hope for fresh government contracts, but it only secured a few new deals as its revenue growth stalled out again. For 2025, it expects its revenue to decline by 11%-21% as it grapples with disruptions to its U.S. Army contracts due to the federal government's consolidation of its data infrastructure. Its backlog is also shrinking, and its gross margins are declining. It recently agreed to acquire the generative AI company Ask Sage, but that acquisition appears to be an eleventh-hour attempt to boost its revenues again.
NYSE: BBAI
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Analysts expect BigBear.ai’s revenue to rise 23% in 2026 as it integrates Ask Sage, but they also expect it to decline 2% in 2027 as it laps that acquisition and its organic growth sputters out. It’s also expected to stay unprofitable for the foreseeable future. With a market cap of $2.9 billion, it still looks richly valued at 18 times next year’s sales. Therefore, BigBear.ai’s upside potential could be limited -- and it could easily be cut in half in the next market crash.
So instead of wondering if BigBear.ai will ever break out of its rut, investors should focus on smaller, higher-growth AI companies that face fewer headwinds. One of those stocks is Innodata (INOD 5.52%), which is currently worth $1.8 billion but could easily outperform BigBear.ai and surpass its market cap within the next year.
Why is Innodata a more promising small-cap AI play?
Innodata didn’t attract much attention when it went public in 1993. It was a small, slow-growth provider of content digitization, digital publishing, and data enrichment services that primarily served niche customers, and its tasks were labor-intensive and expensive to scale.
From 1994 to 2019, Innodata’s revenue only rose at a CAGR of 6%. By the end of 2019, it had dropped 32% below its split-adjusted IPO price of $1.67 per share.
NASDAQ: INOD
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But in 2018, Innodata launched its first suite of task-specific microservices, which could efficiently prepare large amounts of high-quality data for AI applications. The company estimated that “preparing high-quality data takes up 80% of the time for most AI and machine learning projects,” which left little time to develop the actual AI algorithms.
Innodata’s big bet paid off over the past few years as the generative AI boom drove at least five of the Magnificent Seven companies to use its services to prepare their AI-oriented data. From 2019 to 2024, Innodata’s revenue grew at a CAGR of 25% as its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased more than 11 times.
Innodata expects its revenue to rise at least 45% in 2025 and to experience “transformative growth” in 2026 as the AI market expands. Analysts expect its revenue to grow 46% in 2025 and 26% in 2026. They expect its adjusted EBITDA to increase by 53% in 2025 and 26% in 2026.
Unlike BigBear.ai -- which is heavily dependent on rigid government contracts and desperately acquiring more companies to grow its near-term revenues -- Innodata’s future is tethered to high-growth tech giants, and it doesn’t need to acquire more companies to keep growing.
However, Innodata’s market cap of $1.8 billion values the company at just seven times next year’s sales -- which makes it much cheaper than BigBear.ai. If Innodata matches analysts’ expectations through 2026, grows its revenue by another 25% in 2027, and trades at a more generous ten times forward sales, its market cap could more than double to $3.9 billion over the next 12 months. BigBear.ai’s market cap of $2.9 billion could shrink during the same period.
