On Thursday, DA Davidson adjusted its price target for C3.ai (NYSE:), a provider of enterprise artificial intelligence software, to $20.00, down from $30.00 previously, though it maintained a Neutral rating on the stock. The firm cited a decline in subscription revenue as the primary reason for the adjustment.
C3.ai experienced a decline in subscription revenue of approximately $6.5 million quarter over quarter, a stark contrast to the increase of approximately $9.5 million in the last quarter and $5 million in the same period last year.
The company’s year-over-year subscription revenue growth slowed to 20% from 41%. However, this was somewhat mitigated by an increase in professional services, which saw total revenue grow 21% year-over-year, a slight improvement from 20% in the previous quarter. Additionally, revenue not related to Baker Hughes, a key partner, was seen growing 37% year-over-year.
C3.ai has seen positive developments in the state and local government sectors, and has announced several significant deals. These new customers are reportedly moving quickly through the sales cycle, and C3.ai plans to aggressively pursue these and other public sector opportunities.
The company’s federal business has continued to show positive trends, and within the quarter, C3.ai introduced a new generative AI solution targeting government programs, which is anticipated to be well-received by customers.
The company plans to increase its sales capacity in North America and Europe, and plans to continue investing in various business areas, including research and development (R&D) and marketing. Partnerships have been fruitful for C3.ai, contributing to bookings in the quarter, with increased activity levels seen across several partners.
In other recent news, C3.ai, Inc. reported a first-quarter adjusted loss of $0.05 per share, beating analysts’ estimates of a loss of $0.13. The company’s revenue for the quarter was $87.2 million, up slightly from the consensus estimate of $86.94 million and up 21% year over year from $72.4 million.
Despite these positive results, investors were cautious due to the company’s softer outlook for the second quarter and full fiscal year 2025. C3.ai forecasts second-quarter revenue of $88.6 million to $93.6 million, with full-year revenue expected to range from $370 million to $395 million.
Chief Executive Officer Thomas M. Siebel highlighted the company’s strong start to the fiscal year, driven by growing demand for enterprise AI. C3.ai also reported positive free cash flow of $7.1 million for the quarter and maintains a strong cash position with $762.5 million in cash, cash equivalents and marketable securities.
The company has made significant strides to expand its market presence, particularly in the manufacturing and state and local government sectors, closing 71 deals in the quarter, a year-over-year increase of 122%. These are recent developments that reflect the company’s performance and business direction.
InvestingPro Insights
As C3.ai (NYSE:AI) goes through a challenging period with fluctuating subscription revenues, the latest data from InvestingPro provides additional context for investors considering the stock. With a market cap of $2.92 billion and revenue growth of 16.41% over the trailing twelve months to Q4 2024, the company is showing some resilience despite market volatility. Gross profit margin stands at a healthy 57.49%, indicating a strong ability to control costs relative to revenue.
InvestingPro’s advice highlights that C3.ai has more cash than debt on its balance sheet, a sign of financial stability, and that analysts have revised its earnings upwards for the next period, suggesting future growth potential. However, it is important to note that the company is not expected to be profitable this year and that the share price has seen significant volatility, with the price declining by more than 24% over the past three months. Investors should also note that C3.ai does not pay dividends, which may be a consideration for those looking for income-generating investments.
For those interested in deeper analysis, InvestingPro offers additional insights into C3.ai, allowing for a better understanding of the company’s financial health and stock performance. With the next earnings report date set for September 4, 2024, investors will be keeping a close eye on any signs of improvement or new challenges ahead.
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