BigBear.ai has taken investors on a wild ride.
BigBear.ai (BBAI -5.81%) has gained traction among investors seeking artificial intelligence (AI) stocks with significant growth potential. With a market capitalization of $2.5 billion (as of Sept. 19), this AI data analytics company remains relatively small in the grand scheme of things. Despite its volatility, BigBear.ai has delivered impressive returns over the past year, boasting a remarkable 334% increase.
Rapid growth often prompts companies to consider stock splits to prevent their share prices from escalating too high. This can be an exhilarating time for investors. Historically, companies experience an average 12-month return of 25.4% following a stock split announcement, significantly outperforming the S&P 500 index, which has an average annual return of 11.9%.
Given BigBear.ai’s growth trajectory, could a stock split be on the horizon? The company has never executed one before, so let’s explore whether that might change soon.
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A forward stock split is highly unlikely
The most common type of stock split is a forward split, where a company increases its number of shares while lowering its share price. For instance, if you own 10 shares of a company trading at $300 and it conducts a 3-for-1 stock split, your 10 shares would become 30, and the share price would drop from $300 to $100.
It’s important to note that the actual value of your investment remains unchanged after a stock split; only the share price and the number of shares are affected.
Forward stock splits typically occur when a stock’s price rises to a level that may deter potential investors. For example, a share price of $1,000 could discourage many, especially those on a budget.
Fortunately for BigBear.ai, this isn’t a concern at the moment. Even after its recent success, the stock trades for under $10, with an all-time high of $12.69. Therefore, there seems to be little incentive for BigBear.ai to pursue a forward split, but there are other types of stock splits to consider.
A heavy drop in value could lead to a reverse stock split
In a reverse stock split, a company reduces its number of shares while increasing its share price. While forward splits are generally viewed positively by investors, reverse splits often signal trouble. They typically occur when a company’s low share price puts it at risk of being delisted.
BigBear.ai is listed on the New York Stock Exchange (NYSE), which requires companies to maintain a share price of at least $1. If a company’s share price falls below $1 for a consecutive 30-day trading period, it risks non-compliance.
There was a time when BigBear.ai faced this challenge, dropping to an all-time low of $0.63 in December 2022 and spending much of the previous year below $2. However, barring a significant downturn, a reverse split seems unlikely for BigBear.ai.
BigBear.ai has posted lackluster results so far
At first glance, BigBear.ai appears to be an exciting investment opportunity. The company utilizes AI to analyze data, primarily targeting government contracts and developing tailored solutions. One might draw comparisons to Palantir Technologies, which has seen an astonishing 2,220% increase over the last three years.
However, Palantir reported a year-over-year revenue growth of 48% to $1 billion in Q2 2025, while BigBear.ai experienced an 18% revenue decline year-over-year, totaling $32.5 million. Additionally, Palantir boasts a gross profit margin of 81% for its most recent quarter, compared to BigBear.ai’s mere 25%.
Given the current circumstances, the likelihood of BigBear.ai announcing either a forward or reverse stock split is extremely low. Even if such a decision were made, it wouldn’t resolve the underlying issues. While other AI companies are witnessing revenue surges, BigBear.ai’s earnings have declined, and its low profit margins highlight operational inefficiencies. Until these metrics improve, investing in BigBear.ai remains a risky proposition.
Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
