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A New Era for C3.ai: Forecasting Losses and Expanding Opportunities

Summary

C3.ai Inc. recently reported quarterly revenues and fiscal year’s forecast that fell short of analysts’ expectations. The company disclosed below-average quarterly earnings and projected an operational loss for the fiscal year that exceeds previous projections. This news led to a […]

A New Era for C3.ai: Forecasting Losses and Expanding Opportunities

C3.ai Inc. recently reported quarterly revenues and fiscal year’s forecast that fell short of analysts’ expectations. The company disclosed below-average quarterly earnings and projected an operational loss for the fiscal year that exceeds previous projections. This news led to a 9% drop in the stock value during extended trading.

Despite these challenges, C3.ai remains optimistic about its growth prospects. The Redwood City-based company specializes in data management and analysis software and is well-positioned to capitalize on the growing adoption of artificial intelligence (AI). They recently introduced generative AI products, which generate text and images in response to user requests. The demand for these products has exceeded expectations, prompting C3.ai to invest more heavily than initially anticipated.

This investment in generative AI has put short-term pressure on cash flow and profitability, according to CEO Tom Siebel. However, the company still expects positive cash flow during the current fiscal year, which ends in April 2025. Despite the forecasted loss, C3.ai believes it is well-positioned to be a valuable asset for enterprises adopting AI, aiming to achieve sustainable profitability and establish a leading global market position.

However, the higher-than-expected projected loss illustrates the challenges of expanding market share, as noted by Sunil Rajgopal from Bloomberg Intelligence. The company recognizes that it faces hurdles in this regard.

In the second quarter of the fiscal year, C3.ai experienced a 17% sales increase with $73.2 million in revenue. This fell slightly short of analysts’ average expectation of $74.3 million. The adjusted loss per share for the period ending on October 31 was 13 cents, compared to the anticipated loss of 18 cents per share.

CEO Tom Siebel attributed the revenue slowdown to the establishment of new AI management departments within customer organizations, which added a step to the sales process and extended the typical sales cycle.

The company’s stock value dropped to a minimum of $26.05 during extended trading, following the market close at $29.16 in New York. Previously, C3.ai’s stock had seen a remarkable 161% increase in value. However, some investors remain skeptical about whether the company will meet expectations. C3.ai was the second-most shorted tech stock in the U.S., with nearly 36% of publicly available shares being shorted, as reported by S3 Partners.

To address performance issues, C3.ai is implementing a reorganization of its European sales teams. CEO Tom Siebel believes this restructuring will set them on the right track.

In terms of contract agreements, the company concluded 62 deals in the fourth quarter, although most were pilot projects or contracts valued below $1 million. However, twelve agreements exceeded $1 million, and one valued at over $5 million.

Last month, C3.ai announced that its software would be available for purchase on Amazon.com Inc.’s cloud computing platform, expanding their market reach. This capability to transition trial software into permanent users was a key focus for Wall Street analysts.

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