Shares in C3.ai (AI) saw a sharp decline after the software manufacturer released its fiscal second-quarter revenue report, which failed to meet expectations and included a less optimistic revenue forecast for AI stock.
The earnings report for the October quarter was made public by C3.ai after the market closed on Wednesday. It revealed an adjusted loss of 13 cents per share, a slight increase from the 11-cent loss reported in the previous year. Despite a 17% rise in revenue 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 \(76 million at the midpoint of its guidance, slightly lower than analysts’ expectations of \)77.7 million in revenue.
Although new bookings showed strong growth and the full-year revenue guidance remained steady, Oppenheimer analyst Tim Horan highlighted a shift towards prioritizing pilot trials and transitioning to consumption-priced services. This strategic change has temporarily impacted growth and margins, leading to a downward adjustment in income guidance.
Despite the initial goal of achieving profitability on an adjusted basis by the fourth quarter of the fiscal year, the increased investments in artificial intelligence have compelled C3.ai to delay this objective.
On the stock market, AI stock witnessed a significant drop of 10.8%, closing at 26.02. Prior to the earnings report from C3.ai, AI stock had surged by 172% in 2023.
Deutsche Bank analyst Brad Zelnick, who maintains a sell rating on AI stock, expressed concerns about the speed of conversion and investment in tangible consumption commitments for C3.ai. The company’s financial performance and future guidance have been affected by the prevalence of pilot projects, influencing both revenue growth and gross margins.
Specializing in assisting companies in creating artificial intelligence applications, C3.ai primarily focuses on the energy, financial services, and defense sectors. The recent shift from a subscription-based to a consumption-based pricing model reflects the company’s evolving business strategy.
Moreover, C3.ai, which went public in early December 2020 and raised $651 million through its initial public offering, holds a Relative Strength Rating of 93 out of 99. This rating, sourced from IBD Stock Checkup, highlights the company’s robust market position and performance.
In late 2022, the enterprise AI software provider transitioned to a consumption-based pricing model, although specific pricing details for its new generative AI products have not been disclosed.
