Shares in C3.ai (AI) saw a decrease following the fiscal second-quarter revenue announcement by the software maker, which failed to meet expectations, coupled with a less optimistic revenue projection for AI stock.
The earnings for the October quarter were revealed after Wednesday’s market closure. C3.ai posted an adjusted loss of 13 cents per share, a slight increase from the 11-cent loss the previous year. Despite a 17% revenue growth to \\(73.2 million, analysts surveyed by FactSet had predicted a loss of 18 cents per share on revenue totaling \\\)74.3 million.
Looking forward to the current quarter ending in January, the company estimated revenue of \\(76 million at the midpoint of its guidance, slightly below the analysts’ forecast of \\\)77.7 million.
Tim Horan, an analyst at Oppenheimer, highlighted, “New bookings growth is robust, and the full-year revenue guidance remains unchanged.” However, he pointed out that the company is ramping up investments to meet the demand, resulting in a decrease in income guidance. The company’s shift towards consumption-priced services and emphasis on pilot trials are impacting growth and margins in the short term.
Despite the initial goal of achieving adjusted profitability by the fourth quarter of the fiscal year, C3.ai has revised its position due to increased investments in artificial intelligence.
On the stock market, AI stock experienced a 10.8% drop, closing at $26.02. Prior to the earnings report by C3.ai, AI stock had surged by 172% in 2023.
Brad Zelnick, an analyst at Deutsche Bank, maintains a sell rating on AI stock, expressing concerns about the pace of conversion and investment in tangible consumption commitments for C3. He noted that the financial outcomes and future guidance do not yet reflect the expected acceleration in revenue growth, with gross margins still affected by a higher percentage of pilot projects.
Specializing in assisting companies in developing AI applications, C3.ai primarily targets the energy, financial services, and defense sectors. The company went public in early December 2020, raising $651 million. In late 2022, C3.ai shifted its pricing model from subscription-based to consumption-based, although specific pricing details for new generative AI products have not been disclosed.
