Two distinct investment opportunities, BigBear.ai (BBAI) and Innodata (INOD), allow you to tap into the thriving artificial intelligence (AI) sector. While BigBear.ai focuses on creating AI modules for edge networks, Innodata assists large corporations in readying their data for AI-based solutions.
Over the last year, BigBear.ai’s shares skyrocketed by over 390%, catching investors’ attention due to the company’s successful business stabilization and introduction of biometric security solutions. Similarly, Innodata’s stock increased approximately 140% because of the growing market demand for its AI-focused services. However, it’s important to consider whether these high-flying AI stocks are still worth investing in today.
The differences between BigBear.ai and Innodata
BigBear.ai’s primary AI components are labeled as Observe, Orient, and Dominate. These modules collect data, recognize patterns, and forecast future events respectively. They are installed on edge networks, which preprocess the data before it gets to the original servers of clients. Additionally, they collaborate with larger AI-driven entities, including Palantir, in sharing this data.
Prior to my observation in late 2021, BigBear.ai was gearing up for a public debut through a merger with a Special Purpose Acquisition Company (SPAC). The company had projected that its annual revenue would triple from $182 million in 2021 to an anticipated $550 million by 2024. However, as I watched the unfolding events, I noticed that their revenue actually increased only slightly from $146 million in 2021 to $158 million in 2024. This was due to a challenging competitive landscape, economic pressures, and the bankruptcy of their major client, Virgin Orbit. To bolster its income and broaden its network, BigBear.ai made an acquisition of the AI vision firm Pangiam last April.
Innodata became publicly traded as early as 1993, however, due to its status as a modest analytics software provider and relatively slow growth (6% compound annual increase in revenue from 1994 to 2018), it didn’t garner significant attention. That changed in 2018 when they introduced a suite of specialized microservices designed for efficiently prepping large datasets for AI applications.
Five prominent tech firms eventually enlisted Innodata to organize their AI-focused data sets, leading to an impressive compound annual growth rate (CAGR) of 20% from 2018 to 2024 for Innodata. The success of Innodata stems from the fact that these large tech companies typically allocate 80% of their time to preparing data for a new AI project, while only 20% is spent on actually training the algorithm. By streamlining this inefficient process, these tech titans delegated the data preparation tasks to Innodata.
Which company could grow faster over the next three years?
For the upcoming three years, BigBear.ai’s expansion can primarily be fueled by an increasing number of government contracts. These contracts involve various projects like introducing updated digital ID and biometrics solutions for the Department of Homeland Security (DHS) at airports and other border crossings, modernizing the U.S. military’s Orion Decision Support Platform (DSP), and implementing new supply chain strategies. Additionally, as economic conditions improve, the company may attract more commercial clients too.
Over the same timeframe, the burgeoning market for generative AI is expected to boost Innodata’s growth. This growth surge is due to increased expenditure by major tech companies on Innodata’s data preparation services as they scale up their operations in this sector. This trend could potentially draw in additional big-name clients.
| Projected Revenue Growth | 2025 | 2026 | 2027 |
|---|---|---|---|
| BigBear.ai | 6.1% | 12.1% | No consensus yet |
| Innodata | 41.5% | 23.5% | 5.1% |
For BigBear.ai, experts predict a speedier increase in earnings from 2025 to 2026; however, no precise predictions have been made for 2027. Conversely, Innodata is anticipated to slow its revenue growth starting from 2026 and extending into 2027 due to reaching the saturation point with its primary customers, Magnificent Seven. Expansion into new markets hasn’t been accounted for in these current estimates.
BigBear.ai currently operates at a loss, but financial experts predict it will decrease these losses by the year 2026. Conversely, Innodata transitioned into profitability in 2024, and analysts anticipate its annual net income to expand by 16% from 2025-2027. This growth is attributed to enhanced pricing power within their specialized market and the benefits of economies of scale.
Which stock is a better value right now?
As an excited investor, I find it intriguing that BigBear.ai, with a market cap of $2.1 billion, is trading at 12 times its projected annual revenue for this year. On the other hand, Innodata, valued at $1.6 billion, is offering shares at less than 7 times its anticipated sales for the same period. The difference in their valuation multiples could present an interesting opportunity for those looking to explore the potential of these two companies!
If BigBear.ai doesn’t ramp up its revenue expansion in 2027 and beyond, it may seem costly. While its progress in the government sector is promising, those agreements can be less stable compared to commercial contracts. Furthermore, it’s expanding at a more gradual pace than other AI frontrunners like Palantir with faster growth rates.
In the long run, it seems that Innodata offers a more attractive investment opportunity as analyst predictions for 2027 may underestimate its potential. Given its substantial cash inflows from the Magnificent Seven clients, it has ample room to grow both through organic development and strategic acquisitions over the next two years. While both BigBear.ai and Innodata could profit from the ongoing growth of the AI market, Innodata’s stronger growth rate, higher profits, and lower valuation make it a more appealing investment choice.
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2025-07-22 03:52