For businesses to stay competitive, the integration of AI has become essential. While some companies, like Nvidia (NASDAQ: NVDA), have exceeded expectations with a revenue surge of over 200% year-over-year, reaching $18 billion in Q3 2023 and achieving record profits, others such as C3 have not met anticipated outcomes. Ai (NYSE: AI) has consistently failed to meet the forecasts of analysts and traders, resulting in ongoing profit challenges.
Investors are uncertain about the sustainability and justification of the 159% year-to-date gains, yet the stock symbol “AI” and a significant 29.74% short interest have contributed to the rise in share prices.
Initially, C3. Ai attributed its revenue decline at the beginning of the year to the transition to a software-as-a-service (SaaS) subscription and consumption model. However, this rationale is no longer valid. While a temporary revenue decline is reasonable during the transition phase, indicators such as bookings, annual recurring revenue (ARR), backlog, and subscription growth should reflect substantial progress. Despite the shift, the fiscal Q2 2024 results reveal a modest 12% increase in subscription revenues to $66.4 million.
The company expected a surge in customer acquisition following the subscription model switch, offsetting the initial revenue dip. However, C3. Ai acknowledged this issue during their presentation.
C3. Ai is currently in Phase 1, known as the “Consumption-Based Income Transition,” which includes the Introduction and Transition period. Phase 2, the Deal Ramp & Early Consumption stage, extends until the third quarter. The most significant revenue growth is anticipated during Phase 3, the “Scale Out & Consumption Acceleration Stage,” expected to occur in the next four quarters, with the pivotal moment in the eighth quarter.
On December 6, 2023, C3. Ai reported a fiscal Q2 2024 EPS loss of 13 cents per share, surpassing consensus estimates by 18% or 5%. The online loss per share was 59%. Profits rose by 73.2% year-over-year to \(72.32 million, falling short of analyst forecasts. Subscription revenue, accounting for 91% of total revenue, increased by 12% year-over-year to \)66.4 million. Client relationships grew by 81% to 404. The company closed the third quarter with $762.3 million in cash, cash equivalents, and assets, finalizing 62 contracts and 36 pilots during the period.
C3. Ai projects revenues of \(74 to \)78 million for fiscal Q3 2024, higher than analyst estimates of \(77.69 million. Non-GAAP losses are expected to range from \)40 million to \(46 million. The company forecasts total revenue for fiscal year 2024 to be between \)295 million and \(320 million, with anticipated non-GAAP full-year losses ranging from \)115 million to $130 million.
Thomas Seibal, CEO of Ai, commented:
The Artificial regular candlestick chart shows a pot and handle pattern. Before AI dropped to a low of \(10.16 by December 2022, the lip line started at \)51.65 in November 2021. By April 2023, shares had staged a rally back to \(34.68 before falling to \)16.79 once more, setting off the weekly market structure low (MSL) breakout of $27.50 in May of that year.
In June 2023, the glass chin line was nearly tested again before dropping back to \(23.31 to start the manage formation. At the 50-band, the daily relative strength index (RSI) came to a standstill. Weekly MSL set retracement support levels are \)27.50, \(23.11, and \)16.79, respectively.
