Can C3.ai (AI) Provide Confidence In New Forward Guidance?

$C3.ai, Inc.(AI)$ is scheduled to release its financial results for the fiscal second quarter of 2026 (period ended October 31, 2025) on Wednesday, December 3, 2025, after the U.S. market close.

The general market sentiment leading into the Q2 2026 report is one of caution, largely following a disappointing fiscal Q1 2026 report where revenue and EPS significantly missed consensus estimates, leading to the withdrawal of full-year guidance.

Note: The wide range in EPS is due to varying analyst reports, but the trend is a consensus for a significant loss.

C3.ai (AI) Fiscal Q1 2026 Earnings Summary (Ended July 31, 2025)

The Q1 2026 results were widely regarded as a significant miss on both the top and bottom lines, leading to a sharp market reaction.

Key Financial Highlights

Management Commentary & Key Explanations

Founder and then-CEO Thomas Siebel called the financial performance "completely unacceptable," and management attributed the severe miss to two primary, self-inflicted factors:

1. Disruption from Reorganization: The company had undertaken a complete restructuring of its global sales and services organization, including the installation of new leadership (and a new CEO appointment). This mid-quarter change created internal confusion and poor sales execution, directly delaying and preventing the closure of deals.

2. Health Issues of Thomas Siebel: Siebel also cited unanticipated health issues that prevented him from participating in the sales process as actively as in the past, noting his crucial historical role in closing major enterprise deals.

Despite the weak financials, the company noted some operational positives, including closing 46 agreements and seeing a year-over-year increase in the qualified pipeline, suggesting long-term demand for their Generative AI offerings remained strong.

The Lesson Learned from Guidance Withdrawal

The most significant action C3.ai took was withdrawing its previous full-year Fiscal 2026 guidance. This was a pivotal moment for investors and provided a crucial lesson:

1. Prior Guidance Was Unreliable Due to Internal Volatility

• The Lesson: Management's previous confidence and growth projections failed to account for the disruptive execution risk of their planned internal reorganization and leadership changes. For investors, the lesson is that a strategic pivot (like a sales restructuring) introduces material, near-term execution risk that can instantly derail long-term financial targets, even in a red-hot market like AI.

2. The Sales Model Shift is Highly Complex and Unpredictable

• The Lesson: C3.ai is transitioning from large, upfront license deals to a consumption-based model (pay-as-you-go). The Q1 miss confirmed that the shift's effects are highly unpredictable and difficult to model. The withdrawal signals that management itself could not accurately forecast how quickly or slowly customers would convert from Initial Production Deployments (IPDs) to full-scale consumption contracts.

3. Need for Credibility and a "Clean Slate"

• The Lesson: The withdrawal was an implicit admission that their initial long-term targets were unattainable given the poor Q1 performance and internal turmoil. By withdrawing the guidance, the company took a necessary step to reset investor expectations and regain credibility. The market now expects the new CEO and restructured organization to issue conservative, achievable guidance when they update the full-year outlook.

The lesson for investors is that a company navigating a simultaneous strategic pivot (consumption model) and a massive internal re-org (sales structure/CEO change) is an investment in uncertainty. All prior forecasts must be discarded, and the focus shifts entirely to the next quarter’s results and the new, conservative guidance.

Key Metrics Investors Should Watch

Given the company's recent challenges and the shift in strategy (focusing on generative AI and consumption-based models), investors will be looking beyond the headline numbers for signs of stabilization and growth momentum.

1. Revenue Mix & Growth Rate (Subscription Focus)

• Subscription Revenue Growth: This is the most critical metric for a Software-as-a-Service (SaaS) company. Analysts are forecasting a decline in subscription revenue (around -15.7% YoY), which would be a major concern. Investors will want to see this decline slow down or, ideally, return to growth.

• Total Revenue vs. Guidance: Compare the reported total revenue against the low and high end of the guidance C3.ai provided for the quarter. Meeting or beating the guidance is essential to restoring credibility after the Q1 miss.

• Professional Services Revenue & Margin: C3.ai has historically used professional services to kickstart customer adoption. A high percentage of revenue from this segment could indicate difficulty in deploying their core subscription software. Watch the Gross Margin for Professional Services as analysts project a significant drop (from 89.0% reported last year to around 77.3% expected this quarter).

2. Customer Acquisition and Engagement

• Total Customer Count/New Bookings: The market is highly focused on new customer wins, especially for their Generative AI offerings. Look for updates on the pace of customer acquisition and deal closures.

• RPO (Remaining Performance Obligations): This metric represents future revenue under contract and is a strong indicator of long-term demand and stability in the business model. Strong RPO growth suggests healthy future revenue, regardless of the current quarter's reported revenue.

3. Profitability and Financial Health

• Non-GAAP Operating Loss / Path to Profitability: While a loss is expected, investors will look for a clearer, more conservative timeline to achieve Non-GAAP profitability. Any acceleration of this timeline would be a significant positive catalyst.

• Gross Margin (Non-GAAP): Specifically, the Subscription Gross Margin is expected to drop significantly (from 57.0% last year to around 40.2% expected). A smaller-than-expected decline or a beat here would be a positive sign of efficient service delivery.

• Cash Position: C3.ai has a strong cash balance (reported million in Q1 FY26 with no debt). Investors will watch for significant changes in Free Cash Flow and Cash Burn to ensure their runway remains long.

4. Forward Guidance

• Fiscal Q3 2026 and Full Year 2026 Guidance: After withdrawing full-year guidance in Q1, the market will scrutinize any new guidance provided. Conservative, yet achievable, revenue and EPS guidance is critical to regain investor trust.

C3.ai (AI) Price Target

Based on 13 analysts from Tiger Brokers app offering 12 month price targets for C3ai in the last 3 months. The average price target is $17.17 with a high forecast of $40.00 and a low forecast of $8.00. The average price target represents a 21.86% change from the last price of $14.09.

Opportunity for Trading Short-Term Post-Earnings

Trading C3.ai (AI) post-earnings is considered high-risk due to the stock's high volatility and the mixed signals from its underlying business model.

• High Volatility Expected: C3.ai has a high Beta () and the options market typically prices in a significant price move (historically to , sometimes higher). This implies large, sharp moves are likely on either a beat or a miss.

• Current Sentiment: The stock has seen substantial insider selling and a significant price drop over the past year. Analysts generally have a "Hold" or "Reduce" consensus rating. This negative overhang means the bar for a positive surprise might be low, but the risk of a negative surprise is high.

Potential Catalysts (Short-Term Upside):

1. Subscription Revenue Beat: Reporting subscription revenue growth that stabilizes or beats the low consensus estimate of million would be a strong indicator that their pivot to a consumption-based model and generative AI is succeeding.

2. Strong Forward Guidance: Reinstating a conservative, achievable full-year guidance with a clear path to Non-GAAP profitability could trigger a strong short-covering rally.

3. Large Customer Win (especially Generative AI): Announcement of a massive new contract, particularly with a high-profile customer or within the government/defense sector (a key vertical for C3.ai).

Potential Pitfalls (Short-Term Downside):

1. Revenue/EPS Miss (especially Revenue): Missing the already lowered consensus total revenue ( million) or consensus EPS ( to ) will confirm the continuation of current trends and likely lead to a sharp sell-off.

2. Weak Subscription Outlook: A further-accelerated decline in the subscription business, indicating a failure to quickly monetize the generative AI hype cycle.

3. High Cash Burn: A significant increase in operating expenses or cash burn could be viewed very negatively, despite the large cash balance.

The short-term trading opportunity hinges on a "less bad than expected" report, especially in subscription revenue and the clarity/confidence of the new forward guidance.

Technical Analysis - Exponential Moving Average (EMA)

C3.ai have been trading on the negative RSI momentum, and though it is making small recovery recently but that is still not enough to come out safe, and the concerns over its cash burn and also the forward guidance reduction would be in focus.

Would C3.ai gave a more positive forward guidance to get back investors confidence? or C3.ai is still navigating its decline in subscription revenue, and whether C3.ai can convert new Generative AI pilots and adopting the consumption-based model.

Summary

C3.ai (AI) is set to announce its Fiscal Q2 2026 earnings (for the period ending October 31, 2025) on Wednesday, December 3, 2025, after a highly disappointing Q1 report where the company missed estimates and withdrew its full-year guidance.

Analyst Consensus (Cautionary Outlook):

• Revenue: Expected to be to million, representing a significant year-over-year decline ().

• Non-GAAP EPS: A substantial loss is expected, with consensus around to .

• Sentiment: The consensus rating remains cautious ("Hold" or "Reduce") due to internal execution issues and a high-risk transition.

Key Metrics to Watch:

1. Subscription Revenue Trend: This is the most crucial metric. Investors need to see the decline in recurring subscription revenue stabilize, indicating success in converting new Generative AI pilots and adopting the consumption-based model.

2. New Guidance: After withdrawing full-year guidance in Q1, the market will scrutinize any new, conservative guidance for Q3 and the full year to restore credibility.

3. Customer Acquisition/RPO: Updates on the number of new customers and growth in Remaining Performance Obligations (RPO) are key indicators of future demand, regardless of current revenue figures.

4. Path to Profitability: Clearer timelines and a lower cash burn rate are essential, as the market is focused on when C3.ai can achieve non-GAAP profitability.

Short-Term Trading Opportunity:

Trading is high-risk due to expected volatility. A positive surprise (better-than-expected subscription revenue or strong, credible forward guidance) could trigger a significant rally. Conversely, another miss, confirming continued sales turmoil, would likely lead to a sharp sell-off.

Appreciate if you could share your thoughts in the comment section whether you think C3.ai could provide an improvement in its decline in recurring subscription revenue and show that it can convert new Generative AI pilots and adopting the consumption-based model.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.