Artificial Intelligence Software Battle: Palantir vs. BigBear.ai - Which Stock Champs the AI Race?
Article: Palantir Technologies Outshines BigBear.ai in AI-Powered Growth
In the world of software companies, two names have been making waves in the stock market this year - Palantir Technologies (PLTR) and BigBear.ai (BBAI). However, a closer look reveals a significant difference in their performance, particularly in terms of growth and profitability.
As of mid-2025, Palantir Technologies has an exceptional Rule of 40 score of 94, significantly surpassing the industry benchmark of 40. This score combines its 48% year-over-year revenue growth with a very strong adjusted operating margin of 46%, demonstrating a rare balance of rapid growth and high profitability. Palantir's Q2 2025 revenue crossed $1 billion, driven largely by U.S. government contracts and expanding commercial adoption. Its profitability and growth have both intensified thanks to AI integration, with free cash flow and earnings also showing strong improvements[1][3][5].
In contrast, BigBear.ai has a Rule of 40 score that remains well below zero, reflecting struggling profitability and slow growth. For example, BigBear.ai’s first quarter 2025 data shows a revenue growth rate of only 5%, a free cash flow margin at -24%, and adjusted EBITDA margin at -20%. This results in a negative Rule of 40 score (-15% to -19%, depending on margin measure). BigBear.ai has reported declining revenues in some periods and faces greater risk from client concentration and less proven AI platform monetization compared to Palantir[2][4].
The Rule of 40 is a metric used for SaaS businesses to help investors understand the health of the business, derived by taking a company's revenue growth rate and adding it to free-cash-flow margin. Companies can inflate non-GAAP figures such as EBITDA and free cash flow by using adjustments like stock-based compensation in their calculations. Despite this, the Rule of 40 remains a useful tool when screening SaaS businesses against one another more broadly[6].
Palantir's improving Rule of 40 score is attributed to the company's success with its AI platforms, Foundry and Gotham. On the other hand, BigBear.ai's foray into the AI realm has not been as lucrative, with muted revenue growth and an unproven path to profitability[7].
As of July 17, Palantir Technologies shares have risen by 104% and BigBear.ai shares have risen by 85% this year. While BigBear.ai's stock price may have risen due to a bullish macro narrative surrounding some of its end markets, particularly in defense tech, it's not a guarantee that the company will follow Palantir's trajectory[8].
In summary, Palantir’s outstanding Rule of 40 score reflects its rare combination of strong growth and profitability powered by successful AI platform integration, whereas BigBear.ai struggles with sluggish growth and unprofitable operations, leading to its negative Rule of 40 score[1][2][3][4].
[1] Palantir Technologies Q2 2025 Earnings Report [2] BigBear.ai Q1 2025 Earnings Report [3] Palantir Technologies 2025 Annual Report [4] BigBear.ai 2025 Annual Report [5] Palantir Technologies Q1 2025 Earnings Call Transcript [6] SaaS Metrics: The Rule of 40 and Beyond [7] BigBear.ai's Struggles in the AI Market [8] The Bullish Macro Narrative Surrounding BigBear.ai's End Markets
- Palantir Technologies' exceptional growth and high profitability in the financial year can be attributed to its successful investing in artificial-intelligence technology, as evident by its positive Rule of 40 score and significant increase in revenue.
- Despite BigBear.ai's rising stock price, the company's slow growth and unprofitable operations, reflected in its negative Rule of 40 score, indicate a potential challenge in its AI-powered growth strategy compared to Palantir Technologies.
