- C3 AI exceeded earnings and revenue expectations for fiscal Q1 but saw a sharp drop in stock price.
- Posted a narrower-than-expected loss of five cents per share, with revenue up 21% to $87.2 million.
- Subscription revenue, a key metric for profitability, missed forecasts at $73.5 million versus $79.2 million.
- Shifted from software licensing to a subscription-based model, but profitability remains delayed.
- Net loss was $62.8 million, a marginal improvement from $64.3 million a year earlier.
- Secured 71 new agreements and several federal contracts, showing strong customer acquisition growth.
- The company projected a full-year fiscal 2025 revenue of $370-395 million, with an operating loss of $95-125 million.
- C3 AI’s stock is down 20% year-to-date, underperforming the broader Nasdaq index.
Main AI News:
C3 AI Inc. exceeded earnings and revenue forecasts for its fiscal first quarter, but its stock plummeted in after-hours trading due to lingering concerns about its profitability timeline. The AI software provider reported a narrower-than-expected loss of five cents per share, compared to Wall Street’s projection of a 13-cent loss. Revenue increased by 21% to $87.2 million, slightly beating the $86.9 million forecast.
While the company provided revenue guidance for the next quarter in line with market expectations, investors were unsettled by lower-than-anticipated subscription revenue, which came in at $73.5 million—well below the projected $79.2 million. Subscription revenue remains a key performance indicator for the company and is crucial to achieving profitability.
C3 AI, which has been shifting from a software licensing model to a subscription-based approach since late 2022, faces increased scrutiny as investors grow impatient for quicker results. The company had previously set expectations of becoming profitable by the end of fiscal 2024. Still, its recent $62.8 million net loss shows only a slightly improvement from a $64.3 million loss a year earlier.
Despite securing 71 new agreements during the quarter—a 122% increase year-over-year—along with critical federal contracts and new customers like Centrais Elétricas Brasileiras S.A. and Nucor Corp., C3 AI’s profitability remains elusive. The company now projects full-year fiscal 2025 revenue between $370 million and $395 million, accompanied by an operating loss of $95 million to $125 million.
C3 AI’s stock has been underperforming throughout the year, down 20% year-to-date, while the broader Nasdaq index has gained 14%. Investors remain cautious, as C3 AI continues to show slow progress toward profitability.
Conclusion:
Despite solid top-line growth and customer acquisition, C3 AI’s inability to meet subscription revenue expectations and delayed profitability has shaken investor confidence. For the market, this highlights ongoing challenges for AI-focused companies in balancing growth and profitability, especially as they transition to subscription-based models. Investors in AI companies will likely become more cautious, prioritizing clear profitability trajectories over rapid expansion, especially in the face of increased competition in the enterprise AI sector.
