Executive Summary

Revenue and EPS significantly missed consensus as Army program disruptions weighed on results; Q2 revenue was $32.5M vs consensus ~$40.6M and GAAP EPS was -$0.71 vs consensus -$0.06, while Adjusted EBITDA was -$8.5M vs consensus -$2.2M *.
Full-year 2025 revenue guidance was cut from $160–$180M to $125–$140M and Adjusted EBITDA guidance was withdrawn, citing federal contract efficiency efforts and Army data architecture consolidation; cash balance reached a record $390.8M, enabling inorganic/organic investments .
Management emphasized strategic catalysts: anticipated DHS/DoD “One Big Beautiful Bill” funding, UAE partnership under IHC, and multiple deployments/partnerships in biometrics and airport threat detection, supporting a medium-term growth narrative despite near-term headwinds .
The stock’s near-term reaction catalyst is likely the magnitude of the revenue/EBITDA miss and guidance cut; medium-term is the company’s balance sheet strength powering M&A/expansion and potential incremental US federal and international deals .

What Went Well and What Went Wrong

What Went Well

Record cash on hand of $390.8M as of June 30, 2025, after warrant exercises and ATM issuance, positioning the company for “transformational investments” and M&A optionality .
Strategic expansion: partnership in the UAE under the IHC umbrella to accelerate AI adoption across domains, marking the start of international expansion; collaborations with DEFCON AI and Analogic enhance defense logistics analytics and airport threat detection, respectively .
Backlog remained robust at $380M, providing revenue visibility despite near-term contract disruptions .

What Went Wrong

Revenue declined 18% YoY to $32.5M due to lower volume on certain Army programs; gross margin compressed to 25.0% vs 27.8% YoY; Adjusted EBITDA deteriorated to -$8.5M vs -$3.7M YoY, reflecting mix and higher R&D .
GAAP net loss widened to -$228.6M, driven by non-cash derivative fair value changes ($135.8M) and a $70.6M non-cash goodwill impairment; GAAP EBITDA was -$222.4M .
Guidance cut: FY25 revenue lowered to $125–$140M, and prior Adjusted EBITDA guidance was withdrawn amid Army program uncertainty and anticipated second-half growth investment spending .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025	Q2 2025 Consensus
Revenue ($USD Millions)	$39.8	$34.8	$32.5	$40.6*
Gross Margin %	27.8%	21.3%	25.0%	—
Adjusted EBITDA ($USD Millions)	$(3.7)	$(7.0)	$(8.5)	$(2.2)*
GAAP Net Loss ($USD Millions)	$(14.4)	$(62.0)	$(228.6)	—
Diluted EPS ($USD)	$(0.06)	$(0.25)	$(0.71)	$(0.06)*

KPIs and Balance Sheet

Metric	Q1 2025	Q2 2025
Backlog ($USD Millions)	$385	$380
Cash and Cash Equivalents ($USD Millions)	$107.6	$390.8
SG&A ($USD Millions)	$22.7	$21.5
R&D ($USD Millions)	$4.2	$4.4
Gross Margin %	21.3%	25.0%

Notes:

Consensus values marked with * retrieved from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Millions)	FY 2025	$160–$180	$125–$140	Lowered
Adjusted EBITDA	FY 2025	Negative single-digit millions	Withdrawn	Withdrawn

No guidance provided for margins, OpEx, OI&E, or tax rate in Q2 materials .

Earnings Call Themes & Trends

Note: The Q2 2025 earnings call transcript could not be retrieved due to a document inconsistency. Themes below reflect prepared remarks and related releases.

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q2 2025)	Trend
AI/technology initiatives	Q1: Focus on DHS and Digital Identity awards; 5% YoY revenue growth	UAE partnership under IHC; investor presentation; expanded airport biometrics deployments; threat detection integration with Analogic	Expanding platform and partnerships
Federal contracts & funding	Q1: Government funding delays; carrying excess SG&A capacity	Army efficiency efforts and data architecture consolidation disrupted programs; “One Big Beautiful Bill” cited as future catalyst (DHS + DoD supplemental funds)	Near-term pressure; medium-term opportunity
International expansion	Limited in prior releases	Formal pivot with UAE partnership indicating global demand	Initiating international growth
R&D and product execution	Q1: Increased R&D; integration costs (prior year)	R&D up YoY; continued product investments in biometrics and defense logistics	Continued investment
Balance sheet & capital actions	Q1: Warrant exercises; debt reduction; cash $107.6M	ATM proceeds; record cash $390.8M; equity/APIC up	Significantly strengthened

Management Commentary

“Our robust balance sheet allows us to make significant transformational investments… This legislation will bring a generational investment… $170 billion [DHS], and $150 billion [DoD]… As a Mission Ready AI company… it’s directly in our lane.” — Kevin McAleenan, CEO .
“Beyond the opportunities… we signed a transformative partnership with leading companies in the UAE under the IHC umbrella… This is just the beginning of our international expansion…” — Kevin McAleenan, CEO .
“While… optimistic… we have also seen disruptions in federal contracts… most notably in programs that support the U.S. Army… we have adjusted our full-year guidance…” — Kevin McAleenan, CEO .
“Our record cash balance will enable us to make significant investments, both organically and inorganically…” — Sean Ricker, CFO .
“Deploying Enhanced Passenger Processing at scale requires near seamless integration of advanced biometrics, AI, and operational infrastructure…” — Kevin McAleenan, CEO .
“BigBear.ai looks forward to joining forces with Analogic to elevate security standards and enhance traveler experiences…” — Kevin McAleenan, CEO .

Q&A Highlights

The Q2 2025 earnings call transcript was unavailable due to a retrieval error. Based on prepared remarks:

Guidance clarification: FY25 revenue cut to $125–$140M and Adjusted EBITDA guidance withdrawn due to Army program uncertainty and planned growth spending .
Federal environment: Management pointed to expected DHS/DoD supplemental appropriations as a medium-term tailwind; near-term disruptions tied to Army data modernization efforts .
Capital deployment: With record cash, management signaled readiness for both organic investment and M&A to accelerate growth .

Estimates Context

Revenue: Reported $32.5M vs consensus ~$40.6M; a miss of ~$8.1M (≈20% below), reflecting volume declines on certain Army programs *.
EPS: GAAP diluted EPS -$0.71 vs consensus -$0.06; a significant miss driven by non-cash derivative fair value changes and goodwill impairment *.
Adjusted EBITDA: Reported -$8.5M vs consensus -$2.2M; below expectations as margin mix and higher R&D weighed *.

Consensus values marked with * retrieved from S&P Global.

Where estimates may need to adjust:

Street revenue models likely to reset to the $125–$140M guidance range for FY25; Adjusted EBITDA forecasts will require re-basing until management provides updated guidance .
Assumptions on Army program timing and DHS/DoD appropriations cadence should be pushed out; incorporate international pipeline ramp (UAE/IHC) as a 2026 contribution rather than immediate offset .

Key Takeaways for Investors

Near-term execution risk elevated: Revenue and EBITDA materially missed consensus and FY25 revenue guidance was lowered; portfolio managers should expect estimate cuts and potential volatility around federal program timing .
Balance sheet strength is the strategic offset: $390.8M cash provides dry powder for M&A and growth investments; this underpins medium-term optionality despite operational headwinds .
Federal cycle watch: The “One Big Beautiful Bill” (DHS/DoD supplemental) is a key 2026 revenue catalyst; track award flow, contracting milestones, and backlog conversion .
International expansion credibly underway: UAE partnership plus biometric deployments and airport threat detection integrations broaden end markets; monitor initial contract wins and ARR contribution .
Margin recovery requires mix shift: Gross margin improved sequentially vs Q1 but remains below prior-year levels; higher R&D and capacity costs press near-term profitability .
Model implications: Reset FY25 revenue to $125–$140M and suspend EBITDA target until updated guidance; embed conservative Army program resumption assumptions and delayed DHS/DoD ramps .
Trading setup: Expect “show-me” tape driven by contract announcements, guidance reinstatement, and M&A execution; upside catalysts include international deals and concrete federal awards; downside risks include prolonged Army disruptions and litigation costs .

Footnote: The Q2 2025 earnings call transcript could not be accessed due to a document inconsistency; analysis relies on the 8-K/press release and related Q2-period press materials .

BigBear.ai Holdings, Inc. (BBAI)·Q2 2025 Earnings Summary