Innodata vs. BigBear.ai: Which AI Stock Offers Bigger Upside in 2025?

Core Viewpoint - The article compares two small-cap companies, Innodata (INOD) and BigBear.ai Holdings (BBAI), highlighting their distinct business models, risk profiles, and growth trajectories within the AI ecosystem as investor interest in artificial intelligence continues to grow [1]. Group 1: Innodata (INOD) - Innodata presents a high-growth opportunity at the intersection of generative AI, data engineering, and model safety, serving as a trusted infrastructure partner to major tech companies [2][4]. - In 2024, Innodata reported revenues of $170.5 million, nearly doubling year-over-year, with adjusted EBITDA increasing by 250% to $34.6 million, and net income turning into a profit of $28.7 million [2]. - The company anticipates continued revenue growth of over 40% in 2025, supported by a strong deal flow and a robust pipeline [2]. - Innodata launched a Generative AI Test & Evaluation Platform in partnership with Nvidia, addressing enterprise concerns over AI risk, bias, and transparency [3]. - The company serves five of the "Magnificent Seven" tech firms and is expected to benefit from a cumulative $325 billion investment in generative AI infrastructure by major players [4]. - However, nearly 48% of Innodata's 2024 revenues came from a single customer, posing operational risks if contract renewals falter [5]. Group 2: BigBear.ai (BBAI) - BigBear.ai focuses on decision intelligence for government and enterprise customers, providing mission-critical solutions in sectors like defense and cybersecurity [6]. - The company's contract backlog is projected to grow from $168 million in 2023 to $418 million by the end of 2024, indicating strong revenue visibility [7]. - BigBear secured a $13.2 million sole-source contract from the U.S. Department of Defense, showcasing trust in its capabilities [7]. - Despite a bullish long-term outlook, BigBear reported a net loss of $108 million in Q4 2024, primarily due to a non-cash charge related to convertible notes [8]. - The company faces financial strain with expectations of negative adjusted EBITDA in 2025, reflecting ongoing investments and acquisition integration [8]. - BigBear's reliance on U.S. government contracts introduces risks related to political gridlock and budget uncertainty [10]. Group 3: Financial Estimates and Valuation - For Innodata, the Zacks Consensus Estimate for 2025 sales implies a year-over-year increase of 44.38%, while EPS is expected to decline by 4.49% [11]. - BigBear's 2025 sales are estimated to grow by 5.67%, with EPS expected to rise by 80.91%, although EPS estimates have been trending downward [12]. - In the past six months, BigBear.ai shares surged by 125.2%, while Innodata shares increased by 86.8% [16]. - Innodata trades at a forward price-to-sales (P/S) multiple of 4.44X, slightly above its one-year median, while BigBear's P/S multiple is 5.93X, significantly above its one-year median [18]. Group 4: Conclusion - Innodata is positioned as a key player in AI infrastructure with strong financial momentum and strategic partnerships, making it attractive for investors [19]. - BigBear.ai offers strategic value in a niche market but faces immediate financial challenges and risks associated with government contracts [20].