10-Q: BigBear.ai Q2 2026 Earnings: Revenue Up, Net Loss Widens

BigBear.ai reported a 13.2% revenue increase in Q2 2026 driven by the Ask Sage acquisition, but also saw a significant widening of its net loss.

Summary

• BigBear.ai's revenue for the three months ended June 30, 2026, increased by 13.2% to $36.7 million compared to the same period in 2025, primarily due to the inclusion of Ask Sage's revenue.
• Cost of revenues as a percentage of total revenue decreased from 75% to 67%, attributed to higher-margin Ask Sage revenues.
• Selling, general, and administrative (SG&A) expenses increased by 48.2% to $31.8 million, representing 87% of revenue, due to increased headcount from acquisitions and investments in sales and marketing.
• Research and development expenses rose by 72.1% to $7.6 million, driven by higher headcount and fewer projects qualifying for capitalization.
• Restructuring charges decreased significantly by 79.8% to $0.4 million.
• Transaction expenses were $0.8 million, related to recent acquisitions.
• The net loss for the quarter was $25.7 million, compared to a net loss of $228.6 million in the prior year's quarter, though the prior year included a significant goodwill impairment.
• For the six months ended June 30, 2026, revenue increased by 5.9% to $71.2 million, while the net loss was $82.5 million, compared to $290.6 million in the prior year's period.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to the significant increase in operating expenses, particularly SG&A, which outpaced revenue growth, leading to a substantial net loss despite revenue increases.

Positives

• Revenue increased by 13.2% to $36.7 million for the three months ended June 30, 2026, compared to the prior year, driven by the Ask Sage acquisition.
• Cost of revenues as a percentage of revenue improved to 67% from 75% in the prior year's quarter, indicating better cost management relative to revenue.
• Interest expense decreased significantly by 93.1% to $0.3 million for the quarter, due to lower average principal balances on convertible notes.
• Interest income increased by 124.0% to $3.8 million for the quarter, reflecting higher average cash and investment balances.
• Backlog increased to $269.6 million as of June 30, 2026, from $248.1 million as of December 31, 2025.

Negatives

• SG&A expenses increased by 48.2% to $31.8 million, representing 87% of revenue, indicating a high cost structure relative to current revenue.
• Research and development expenses increased by 72.1% to $7.6 million, with fewer projects qualifying for capitalization, suggesting increased R&D spending without immediate capitalization benefits.
• The net loss for the three months ended June 30, 2026, was $25.7 million, a substantial loss.
• For the six months ended June 30, 2026, the net loss was $82.5 million.
• Cash, cash equivalents, and restricted cash decreased to $38.1 million as of June 30, 2026, from $92.6 million as of December 31, 2025.
• Net cash used in operating activities was $40.2 million for the six months ended June 30, 2026.

Risks

• Funding for U.S. Government programs is subject to budget requests, appropriation processes, and shifting priorities, which could impact the company's financial performance.
• The company's contracts generally include termination for convenience provisions, meaning contracts comprising backlog may not result in actual revenue.
• The company's business, financial condition, results of operations, and cash flows could be adversely affected if the U.S. Government reviews and cancels major defense programs in which it provides solutions or services.
• The company is exposed to market risks from fluctuations in interest rates affecting its investments in debt securities and derivative liabilities tied to its common stock or convertible debt.
• Inflationary pressures could increase costs, and the company may not be able to fully offset these higher costs through price increases.

Future Outlook

The company anticipates that the federal budget, debt ceiling, regulatory environment, and potential tax reform will continue to be subject to debate and compromise, potentially shifting funding priorities and impacting defense spending and its programs. While these evolving challenges are uncertain, the company does not believe they will have a material impact on its business and results of operations, but acknowledges that worsening disruptions could negatively impact its business.

Management Comments

• The company's mission is to help deliver clarity for the world's most complex decisions.
• We are a technology-led solutions organization, providing both software and services to our customers.
• We continue to expect the global economic and geopolitical environment to drive adoption of our offerings over the long term, as it has heightened the need for advanced AI tools that provide enhanced intelligence and full spectrum cyber operations areas where we believe we have unmatched capabilities.

Industry Context

StockSavvy.ai notes that BigBear.ai's focus on Edge AI for national security and supply chain management aligns with increasing government and enterprise demand for advanced analytics and AI solutions in complex operating environments. The recent acquisitions of Ask Sage and CargoSeer indicate a strategy to expand its generative AI capabilities and market reach within the government sector.

Comparison to Industry Standards

• The company's revenue growth of 13.2% in Q2 2026 is moderate compared to some rapidly growing AI startups, but significant given its focus on government contracts which can have longer sales cycles.
• The high SG&A as a percentage of revenue (87%) is a concern and is higher than many established software companies, suggesting a need for improved operational efficiency as the company scales.
• The net loss of $25.7 million in Q2 2026, while substantial, is an improvement from the prior year's loss of $228.6 million, which was heavily impacted by a goodwill impairment charge.

Corporate Governance

Legal Proceedings

• The company is subject to litigation, claims, investigations, and audits arising from time to time in the ordinary course of business.
• The outcome of these matters is not expected to have a material impact on the company's consolidated balance sheets, statements of operations, or cash flows.
• As of June 30, 2026, the company has accrued $0.3 million related to various ongoing legal disputes.

Stakeholder Impact

• Shareholders: The widening net loss and high SG&A expenses may negatively impact shareholder value in the short term, despite revenue growth.
• Employees: Increased R&D and SG&A spending may indicate continued investment in personnel, but restructuring charges suggest potential workforce adjustments.
• Government Customers: The company's reliance on U.S. government contracts exposes it to risks related to government budget and policy changes.
• Creditors: The company's debt obligations and net losses require careful management of liquidity and financial resources.

Next Steps

• Continue to monitor U.S. Government budget and policy changes that could impact defense spending.
• Integrate acquired companies (Ask Sage and CargoSeer) to realize synergies and improve operational efficiency.
• Focus on improving SG&A efficiency to reduce its proportion relative to revenue.
• Continue to develop and deploy Edge AI-powered decision intelligence solutions.

Key Dates

Recommendation

While revenue growth is positive, the significant increase in operating expenses, particularly SG&A, leading to a substantial net loss, raises concerns about profitability and operational efficiency. The company's reliance on government contracts also introduces external risks. The current financial performance warrants a cautious 'hold' stance until operational improvements and clearer path to profitability are demonstrated.

Keywords

AI, Decision Intelligence, National Security, Supply Chain Management, Edge AI, Generative AI, Acquisition, Restructuring