Artificial intelligence investing conversations tend to loop back to the same trillion-dollar names, leaving smaller players like Innodata (NASDAQ: INOD) and BigBear.ai (NYSE: BBAI) underappreciated despite meaningful recent progress.
Both companies just delivered company-reported numbers that suggest AI spending is moving well beyond chipmakers and into the businesses built to support them.
Neither stock is a safe bet, with bottom lines hovering between unprofitable and barely profitable, and both carry significant execution risk for investors.
Innodata has spent years doing the unglamorous work of preparing and labeling data that large language models learn from, selling that work to major tech customers.
In the second quarter, Innodata reported revenue of $92.1 million, up 58% from a year earlier, with adjusted earnings climbing 92% over the same period.
The more significant development is what Innodata is doing with that momentum, as the company closed its first engagement on a new self-serve data platform with 15 more companies currently evaluating it.
Outgoing CEO Jack Abuhoff, who transitioned to executive chairman at the end of September as President Rahul Singhal took over as CEO, disclosed that two hyperscalers are in talks about reselling access to the platform.
That shift from labor-intensive services toward a scalable platform business could command higher margins and valuation multiples than Innodata’s legacy model ever could.
BigBear.ai sells AI-powered analytics software to the U.S. government and in April secured a 10-year contract with the U.S. Air Force worth up to $900 million.
The deal is structured as an indefinite delivery, indefinite quantity contract, which means the Air Force can award task orders to BigBear.ai without running a new competition each time.
While the contract does not guarantee $900 million in revenue, it pre-qualifies BigBear.ai to compete quickly across a decade of Air Force AI work rather than starting from scratch on every opportunity.
CEO Kevin McAleenan has said the company’s acquisition of generative AI platform Ask Sage will broaden its reach across national security customers, with expanded capabilities for Department of Defense missions rolled out in July.
Despite a growing backlog, BigBear.ai’s stock trades near its 52-week low of $2.60, well down from a high above $9, and the company remains deeply unprofitable.
The government pipeline will need to convert into actual cash before the Air Force contract translates into meaningful financial results for BigBear.ai shareholders.
For either company to deliver tenfold returns, both would require years of near-flawless execution from organizations still small enough to be derailed by a single lost customer or delayed contract.
