Better AI Stock: BigBear.ai vs. Innodata

Key Points

• Bigbear.ai's business has become more stable as government contracts increase.

• Innodata's business is booming as it processes more AI data.

• One of these AI stocks looks like a more persuasive investment.

• I like 10 shares more than bigbear.ai›

bigbear.ai (NYSE: BBAI) and Innodata (NASDAQ: INOD) It represents two different ways to invest in the booming AI (AI) market. Bigbear.ai develops AI modules for edge networks, and Innodata helps large companies prepare data for AI applications.

Over the past 12 months, Bigbear.ai stocks have skyrocketed by over 390% as they have impressed investors with the stabilization of their business and the rollout of biometric security services. Innodata's inventory rose approximately 140% as market demand for AI-oriented services spiked. Do you still need to buy one of these high-flying AI stocks today?

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Difference between bigbear.ai and innodata

Three major AI modules in Bigbear.ai – Observation, orientation, and control – ingest data, identify trends, and predict future outcomes. Install the module on the Edge Network. Edge networks receive and process data before they reach the client's origin server. It also shares that data with large AI-driven companies. Palantir.

Before Bigbear.ai was made public by merging with a special purpose acquisition company (SPAC) in the second half of 2021, it claimed that it could triple its annual revenue from $182 million in 2021 to $550 million in 2024, but it increased from $146 million in 2021 to just $158 million. In order to raise revenue and expand the ecosystem, we acquired AI vision company Pangiam in April last year.

Although published in 1993, Innodata attracted less attention as it was a small analytics software provider that increased revenues at a combined annual growth rate (CAGR) of 6% between 1994 and 2018.

Five of the “magnificent seven” companies then hired Innodata to prepare AI-oriented data, with annual revenues surged at a 20% CAGR from 2018 to 2024. These large tech companies often prepare their data for new AI projects and prepare their data for 20% of the time they train their actual algorithms, making their business booming. To speed up that inefficient process, these tech giants outsourced their data preparation to Innodata.

Which companies will grow faster over the next three years?

Over the next three years, bigbear.ai growth should be driven by an inflated backlog of government contracts. This includes the Department of Homeland Security (DHS)'s new digital ID and biometric services at airports and other ports of entry, the modernization project for the US military's Orion Decision Support Platform (DSP), and the modernization project for new supply chain initiatives. It also attracts more commercial clients as the macro environment warms up again.

In the same period, Innodata's growth should be driven by the rapid expansion of the generated AI market. This will encourage large tech customers to spend more on data preparation services. It will probably attract even larger customers.

Projected revenue growth	2025	2026	2027
bigbear.ai	6.1%	12.1%	There is 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 yet to set solid forecasts for 2027. Innodata's revenue growth is expected to slow down in 2026 and 2027.

Bigbear.ai has not yet made profits, but analysts hope to narrow its net losses until 2026. Innodata will increase profitability in 2024, and analysts expect net profit to rise from 16% to 2027 as pricing capabilities in niche markets improve and scale-kick economy improves.

Which stocks are better value now?

Its market capitalization is $2.1 billion, and BigBear.AI will trade at 12 times this year's sales. Valued at $1.6 billion, Innodata is trading at less than seven times its revenue this year.

Bigbear.ai looks a bit expensive if revenue growth does not accelerate after 2027. Growth in the government sector is encouraging, but these contracts may be less predictable than their commercial contracts. It is also still growing at slower speeds than high-growth AI leaders such as Palantir.

Meanwhile, Innodata looks like a better value, as long-term estimates for analysts for 2027 may be too conservative. With all that cash coming from seven spectacular customers, there may still be plenty of ways to expand organically and inorganically over the next two years. So, Bigbear.ai and Innodata may benefit from the secular expansion of the AI market, but Innodata's stronger growth, higher profits, and lower valuations allow for better purchases.

Should I invest $1,000 now?

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Leo Sun has no position in any of the stocks mentioned. Motley Fools is located in Palantir Technologies and recommends. Motley Fools have a disclosure policy.