Better AI Stock: BigBear.ai vs. Innodata
BigBear.ai's business is stabilizing as it gains more government contracts.
Innodata's business is booming as it processes more AI data.
One of these AI stocks looks like a more compelling investment.
10 stocks we like better than BigBear.ai ›
BigBear.ai (NYSE: BBAI) and Innodata (NASDAQ: INOD) represent two different ways to invest in the booming artificial intelligence (AI) market. BigBear.ai develops AI modules for edge networks, while Innodata helps large companies prepare their data for AI applications.
Over the past 12 months, BigBear.ai's stock surged more than 390% as it impressed investors with the stabilization of its business and the rollout of its biometric security services. Innodata's stock rose about 140% as the market's demand for its AI-oriented services soared. Should you still buy either of these high-flying AI stocks today?
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The differences between BigBear.ai and Innodata
BigBear.ai's three main AI modules -- Observe, Orient, and Dominate -- ingest data, identify trends, and predict future outcomes, respectively. It installs its modules on edge networks, which receive and process that data before it reaches its clients' origin servers. It also shares that data with bigger AI-driven companies, such as Palantir.
Before BigBear.ai went public by merging with a special purpose acquisition company (SPAC) in late 2021, it claimed it could triple its annual revenue from $182 million in 2021 to $550 million in 2024. However, its revenue grew from $146 million in 2021 to only $158 million in 2024, as it grappled with tough competition, macro headwinds, and the bankruptcy of its top customer, Virgin Orbit. To boost its revenue and expand its ecosystem, it acquired the AI vision firm Pangiam last April.
Innodata went public back in 1993, but it didn't attract much attention because it was a small analytics software provider that increased its revenue at a compound annual growth rate (CAGR) of 6% from 1994 to 2018. But in 2018, it launched a suite of task-specific microservices that could efficiently prepare large amounts of data for AI applications.
Five of the " Magnificent Seven" companies subsequently hired Innodata to prepare their AI-oriented data, and its annual revenue surged at a CAGR of 20% from 2018 to 2024. Its business boomed because those large tech companies often spend 80% of their time preparing the data for a new AI project and just 20% of that time training the actual algorithm. To speed up that inefficient process, those tech giants outsourced the preparation of that data to Innodata.
Which company could grow faster over the next three years?
Over the next three years, BigBear.ai's growth should be driven by its swelling backlog of government contracts -- which include new digital ID and biometrics services for the Department of Homeland Security (DHS) at airports and other ports of entry, a modernization project for the U.S. military's Orion Decision Support Platform (DSP), and new supply chain initiatives. It could also attract more commercial clients as the macro environment warms up again.
During the same period, Innodata's growth should be fueled by the rapid expansion of the generative AI market, which should drive its big tech customers to ramp up their spending on its data preparation services. It will likely attract even more large customers.
Projected Revenue Growth
2025
2026
2027
BigBear.ai
6.1%
12.1%
No consensus yet
Innodata
41.5%
23.5%
5.1%
Data source: Marketscreener.
BigBear.ai's revenue growth is expected to accelerate in 2025 and 2026, but analysts have not yet set any firm forecasts for 2027. Innodata's revenue growth is expected to decelerate in 2026 and 2027 as it saturates its core customer base of Magnificent Seven customers, and its potential expansion into other markets hasn't been factored into those estimates yet.
BigBear.ai is not yet profitable, but analysts expect it to narrow its net losses through 2026. Innodata turned profitable in 2024, and analysts expect its net income to grow at a CAGR of 16% through 2027 as its pricing power in its niche market improves and economies of scale kick in.
Which stock is a better value right now?
With a market cap of $2.1 billion, BigBear.ai trades at 12 times this year's sales. Innodata, which is valued at $1.6 billion, trades at less than 7 times this year's sales.
BigBear.ai looks a bit pricey if its revenue growth doesn't accelerate in 2027 and beyond. Its growth in the government sector is encouraging, but those contracts can be less predictable than its commercial contracts. It's also still growing at a slower rate than higher-growth AI leaders such as Palantir.
Meanwhile, Innodata appears to be a better value because analysts' longer-term estimates for 2027 may be too conservative. With all that cash coming in from its Magnificent Seven customers, it could still have plenty of ways to expand both organically and inorganically over the next two years. So, while BigBear.ai and Innodata might both benefit from the secular expansion of the AI market, Innodata's stronger growth, higher profits, and lower valuation make it the better buy.
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