Stock Track | C3.ai Plunges Nearly 20% as Subscription Revenue Miss Stokes Growth Concerns

Stock Track2024-09-05

Shares of enterprise artificial intelligence software provider C3.ai, Inc. (NYSE: AI) plummeted nearly 20% in pre-market trading on Thursday, after the company's fiscal first-quarter results and outlook raised concerns about its ability to drive subscription revenue growth and achieve profitability amid a challenging economic environment.

For the quarter ended July 31, 2024, C3.ai reported revenue of $87.2 million, narrowly beating analysts' expectations of $86.9 million. However, the company missed estimates for subscription revenue, a key metric for software companies, with $73.5 million versus the expected $79.1 million. C3.ai attributed the miss to enterprises tightening spending amid economic uncertainties.

While the company reported a non-GAAP loss per share of $0.05, better than the expected loss of $0.13, it expects a wider adjusted operating loss in the fiscal second quarter compared to the first quarter due to increased investments in areas like sales, research and development, and marketing. Additionally, C3.ai maintained its full-year 2025 revenue guidance range of $370 million to $395 million, with the midpoint slightly below analysts' estimates of $383.4 million.

The disappointing results and outlook prompted multiple analysts to lower their price targets on C3.ai, citing concerns about the company's ability to drive subscription revenue growth, expand margins, and achieve profitability in the current economic environment and highly competitive AI landscape. Analysts at BofA Securities, for instance, reiterated their Underperform rating, noting that C3.ai is still operating at an unfavorable growth and margin profile, with limited visibility on when key metrics like remaining performance obligation (RPO) could bottom out and reaccelerate.

While some analysts acknowledged positive signs, such as strong pilot and partner contribution, the overall sentiment remained cautious. C3.ai's stock performance reflects broader concerns about the company's growth trajectory and path to profitability in an increasingly crowded and rapidly evolving AI market, where it faces intense competition from tech giants and well-funded startups alike.

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