Artificial intelligence software company C3 AI Inc. beat on earnings and revenue expectations as it posted its fiscal first-quarter financial results today, but its stock fell hard and fast in extended trading amid fears that it may not achieve profitability as fast as originally hoped.
The company reported a loss before certain costs such as stock compensation of five cents per share, ahead of Wall Street’s forecast, which called for a wider loss of 13 cents. Revenue for the period spiked 21%, coming in at $87.2 million, above the $86.9 million forecast.
In addition, the provider of AI development software delivered an outlook that was more or less in line with the Street’s guidance. For the current quarter, it’s shooting for sales of between $88.6 million and $93.6 million, compared with the $91.1 million analyst consensus estimate.
C3 AI Chief Executive Thomas Siebel (pictured) hailed the company’s “solid start” to the fiscal year. He said the rising demand for enterprise AI helped to drive “our sixth consecutive quarter of accelerating revenue growth.”
However, investors may have been disappointed to see that C3 AI’s subscription revenue came in below the Street’s target. It reported a number of $73.5 million, well below the $79.2 million that analysts were hoping for.
The company’s stock, which was down 2% in the hours prior to today’s report, absolutely cratered, falling by more than 16% after-hours.
Subscription revenue is a key metric for C3.ai and investors believe rapid growth there is required to enable return to profitability. The company is one of Silicon Valley’s oldest enterprise AI development software providers. Its flagship C3.ai Application Platform offers a comprehensive suite of tools and services for businesses that need to build intelligent, enterprise-scale applications, including generative AI apps. According to the company, its platform allows teams to build those applications faster and at a lower cost than other approaches.
That may be so, but in recent years the company struggled to gain much traction, prompting a shift away from selling software licenses to a subscription-based consumption model. That shift occurred in late 2022, with C3 AI explaining that the software-as-a-service model is used to good effect by the likes of Amazon Web Services Inc. and Snowflake Inc.
With slower-than-expected growth in subscription revenue, investors may have questions about when the company is going to become profitable again. One year earlier, it said it hoped to attain profitability by the end of fiscal 2024 by investing in branding, lead generation and market awareness. But those profits failed to materialize, and again today the company failed to make substantial progress, reporting a net loss of $62.8 million, improving only slightly from a $64.3 million loss one year earlier.
The company is at least making progress on the customer acquisition front. It said it closed on 71 new agreements during the quarter, up 122% from a year earlier, including 52 pilots.
Its federal business also gained momentum, with the company signing new contracts with the U.S. Air Force, the U.S. Navy, the U.S. Marine Corps and the U.S. Intelligence Community, among others. Other new customers in the enterprise include Brazil’s largest power generation and transmission company Centrais Elétricas Brasileiras S.A. and the U.S. steel manufacturer Nucor Corp.
Despite those new agreements, the company doesn’t expect to achieve profitability this year either. Looking ahead, C3.ai said it sees full-year revenue for fiscal 2025 of $370 million to $395 million, with an operating loss of $95 million to $125 million.
Not surprisingly, C3.ai’s stock has struggled to gain much traction of late. Heading into today’s report, it was already down 20% on the year to date, compared with a 14% gain for the broader Nasdaq index.