BigBear.ai Buys Ask Sage, Fuels Defense AI Push Amid Cash-Loaded Turnaround Play

BigBear.ai is gaining attention as a potential small-cap AI turnaround story amid strategic moves and a strong balance sheet. In the third quarter of 2025, the company reported $33.1 million in revenues, supported by a $376 million backlog and a record $456.6 million in cash. Its recent acquisition of Ask Sage, a generative AI platform used by 16,000 government teams, is seen as a key catalyst for growth according to analysis.

The company aims to expand into defense, homeland security, and travel-and-trade markets through this acquisition, which is expected to generate $25 million in annual recurring revenue in 2025. The deal positions BigBear.ai to capitalize on the rising demand for secure, agentic AI in regulated environments.

Beyond the U.S., the company is expanding internationally, including a new UAE office and partnerships in border security and aerospace infrastructure. These moves signal ambitions to diversify its revenue base beyond traditional U.S. federal contracts.

How the Competitive Landscape Stands

BigBear.ai's potential as an AI turnaround story faces stiff competition from established players like Palantir and C3.ai. Palantir Technologies has a strong foothold in data fusion and operational AI, particularly in national security and large commercial deployments. Its recurring revenue model and established customer base set a high benchmark for BigBear.ai to meet.

C3.ai, on the other hand, focuses on enterprise AI software across sectors such as energy, manufacturing, and defense. While C3.ai's broad platform and industry reach have driven scale, BigBear.ai's narrower defense-centric strategy has yet to match its level of enterprise traction.

BigBear.ai's strategic focus on agentic AI and mission-critical applications gives it a niche advantage in secure government operations. This differentiation could help it carve out a role in a market where cybersecurity and regulatory compliance are paramount.

Risks to the Outlook

Despite BigBear.ai's strategic momentum, several risks remain. The integration of Ask Sage and expansion into new markets could strain execution capabilities, especially in profitability. While the company's balance sheet is strong, achieving long-term growth will depend on effective cross-selling and margin expansion.

For C3.ai, recent financial results highlight ongoing challenges. In the second quarter of fiscal 2026, C3.ai reported a 20% decline in revenue to $75 million, despite beating analyst estimates. Subscription revenue rebounded slightly, but professional services revenue plummeted to $4.9 million, raising concerns about the company's ability to maintain revenue diversification.

C3.ai's IPD (initial production development) activity has also slowed dramatically, with only 20 total IPDs in Q2 compared to 50 in the same period of 2024. The company reported just six generative AI IPDs, indicating a decline in demand for its AI applications.

The company's cash position remains robust, ending the quarter with $675 million in cash. However, with a projected $200 million loss in fiscal 2026, C3.ai faces significant pressure to improve profitability and reduce its cash burn rate.

What This Means for Investors

For investors, the AI space remains a high-risk, high-reward sector. BigBear.ai's combination of a strong balance sheet, strategic acquisitions, and expansion into secure AI applications offers a compelling case for speculative growth. However, its ability to execute on these plans will determine its long-term success according to market analysis.

C3.ai's recent performance illustrates the volatility in the AI software sector. While the company has shown signs of recovery, including a rebound in subscription revenue, unresolved issues with declining IPD activity and high operating losses remain major headwinds.

As the market continues to evolve, investors should closely monitor both companies' ability to scale their offerings and maintain profitability. The AI sector is still in its early stages, with room for innovation but also intense competition and execution risks according to industry experts.