The BigBear.ai Holdings Inc logo appears on a smartphone screen and as a background on a laptop screen in this photo illustration in Athens, Greece, on August 12, 2025. (Photo by Nikolas Kokovlis/NurPhoto via Getty Images)NurPhoto via Getty ImagesShares of BigBear.ai have soared 76% in 2025, according to the Wall Street Journal.This raises a simple question: With revenue plunging and losses soaring, why are shares of this provider of decision software for national security going up so much? The company has some traits of a meme stock – rising as retail investors seek to squeeze short sellers who borrow stock hoping to repay the loan at a lower price. Bulls are benefiting from superficial positives – the company has ‘ai’ in its name and appears to compete in the same market for government data analysis as does Palantir. There is also some genuine good news – such as a contract to deploy BigBear’s software in military exercises and national security and a partnership with Tsecond, a Silicon Valley startup, to create a battlefield AI solution, noted Forbes.The bears – who look at the company’s double-digit revenue declines, enormous losses, high dependence on a few government contracts, lofty valuation, and high volatility – also seem to have an excellent case.After BigBear.ai’s disappointing second quarter 2025 report, the stock is likely to move significantly following its November 10 third quarter report. Wall Street sees the stock as about 24% over-valued, according to TipRanks.MORE FOR YOUIn August, BigBear.ai saw a bright future ahead following the passage of the One Big Beautiful Bill Act. The legislation provides more than “$170 billion in supplemental funding to the Department of Homeland Security and $150 billion to the Department of Defense for defense technology,” directly aligning with BigBear.ai’s capabilities, CEO Kevin McAleenan said in a company release.The company declined a request to comment. “BigBear.ai is currently in the 'quiet period’ before we announce our 3Q numbers on November 10th - so, as I’m sure you’ll appreciate, we are unable to comment,” noted an October 27 email from a company spokesperson.Read on to learn more about the company’s history, recent performance, bull and bear cases, and what analysts are saying.What is BigBear.ai And How Is The Company Doing?In 2020, a private equity firm formed BigBear.ai after merging two companies – taking the company public in December 2021. More specifically, AE Industrial Partners acquired systems integrator NuWave and data analytics firm PCI Strategic Management and took them public through a merger with a Special Purpose Acquisition Company, according to a company statement. Since then, the stock – roughly 18% of whose float is sold short – has lost about 25% of its value and now holds a stock market capitalization of nearly $3.1 billion, noted the Journal.BigBear.ai’s second quarter performance and prospects disappointed investors – sending the stock down 20%. Revenue has been declining in 2025 – falling 18% in the second quarter to $32.5 million, noted the company’s statement. Management cut its full year revenue forecast 22% to a range between $125 million and $140 million. This implied a 15% to 20% drop in revenue from 2024 – a big disappointment from the company’s original 7% revenue forecast, according to BTCC Academy.Profitability has also deteriorated. BigBear.ai’s net loss soared nearly 16-fold to $228.6 million – roughly 61% of which was due to a fair-value loss on convertible note derivatives. The company’s adjusted earnings before interest taxes, depreciation, and amortization more than doubled to $8.5 million, BTCC Academy noted.The Bull Case For BigBear.ai StockThe bull case for BigBear.ai stock hinges on the chance for short-term increases based on a heavily shorted stock with limited publicly-traded shares going up on any sliver of good news in the $70 billion (2030 forecast) market for AI defense applications, BTCC Academy wrote.How so? When positive news hits, shorts rushing to cover can fuel price spikes. For example, on October 24, nearly 293 million shares traded – roughly three times the normal volume -- on the Tsecond contract news, reported Coin Central.BigBear.ai has diversified by inking civilian infrastructure contracts. For instance, on September 11, the company introduced its veriScan biometric system at Nashville International Airport and on October 23 expanded that service to Chicago O’Hare – cutting international arrival processing from 60 to 10 seconds through the company’s facial recognition software, CoinCentral wrote.Finally, BigBear.ai claims a solid backlog and a $390 million cash balance which could offset losses. The company – which raised cash recently – reports a $380 million contract backlog and hints at “several larger awards in the pipeline,” noted CoinCentral. While this backlog provides some revenue visibility, the actual funding and timing remain uncertain.The biggest force pushing BigBear bulls is momentum. The company is among 2025’s top-performing AI stocks with a devoted following of retail traders, according to Yahoo! Finance. Why BigBear.ai Stock May Go DownThe bear case for BigBear.ai includes inconsistent and declining revenue, significant losses, low margins, high valuation, and customer concentration.While most of these negatives were mentioned above, three others are worth noting: high valuation, competitive threats, and recent insider selling – followed by which the company promoted its interim CFO to to full-time CFO.BigBear.ai’s stock is way overvalued – selling at a price-to-sales ratio of 13. This figure does not make sense in light of the company’s declining revenues. What’s more, the valuation is 3.8 times the S&P 500’s price-to-sales ratio of 3.43, according to Multipl.BigBear.ai competes in the AI defense market against much larger competitors such as Palantir – with revenue in the billions of dollars, Anduril Industries, and established contractors such as Lockheed Martin and Raytheon, noted CoinCentral.Finally. there has been significant insider selling. Indeed on August 27, 2025, then-interim CFO Sean Ricker sold 11,980 shares of the company, according to GuruFocus. On October 14, Ricker was appointed full-time CFO, noted a company filing with the SEC.What Analysts Are SayingWall Street estimates BigBear.ai stock is over-valued. The average price target from three analysts is $5.83, according to TipRanks, making the company’s current price of $7.22 – 24% too high.Optimists such as Rick Orford believe the company’s cash reserve and backlog give it the tools to eventually turn the corner, and they don’t want to miss out on a potential future “multi-bagger” if BigBear successfully scales or adds a big contract or new technology partner, noted TipRanks. I would avoid this stock.