BigBear.ai Stock Falls on Rising Costs Despite 34% Gross Margin

BigBear.ai Holdings Inc. (NYSE: BBAI) saw its stock fall after reporting first-quarter results that highlighted a growing conflict for investors: while revenue from its recent AI acquisition helped expand gross margins to 34 percent, a surge in operating costs led to a wider-than-expected adjusted EBITDA loss of $9.9 million.

"It is great to report significant wins in Q1 amounting to close to $75 million that prove our thesis that national security, and trade & travel are two markets that we are right to stay laser-focused on serving," Kevin McAleenan, CEO of BigBear.ai, said in a statement.

Revenue for the first quarter of 2026 was $34.4 million, a slight decrease of one percent from the prior year. The contribution from the higher-margin Ask Sage acquisition, which closed in late 2025, helped lift gross margin to 34.0 percent from 21.3 percent a year ago. However, this was offset by a $6.5 million increase in selling, general, and administrative expenses, contributing to the adjusted EBITDA loss widening from $7.0 million in the first quarter of 2025.

The market's negative reaction shows that for specialized AI firms like BigBear.ai, top-line performance and margin expansion are no longer enough. Investors are now scrutinizing the path to profitability, and the $6.5 million jump in quarterly operating expenses has become a primary concern that is overshadowing new contract wins and a strengthening sales pipeline.

The increase in operating costs was driven primarily by higher intangible asset amortization from the Ask Sage acquisition, increased legal and proxy expenses, and greater sales and marketing expenses from partnerships and team expansion, according to the company's press release. The net loss for the quarter narrowed to $56.8 million from $62.0 million in the prior-year period, mainly due to non-cash changes in the fair value of derivatives and lower interest expense.

"We've started off this year on a solid footing," said CFO Sean Ricker. "As we focus on operational execution and performance in 2026, we're already seeing strong gross margin expansion from the contribution of Generative AI revenue." The company affirmed its revenue guidance for the full year.

For investors, the results present a challenge seen across the tech sector, where companies like Uber and Lucid are also managing a complex macroeconomic environment. The market is shifting its focus from growth-at-all-costs to a clear and disciplined path to financial self-sufficiency. While BigBear.ai's technology and recent national security contract wins of more than $60 million are promising, the stock's performance will likely depend on its ability to control costs and demonstrate operating leverage in the quarters ahead.

This article is for informational purposes only and does not constitute investment advice.