C3.ai stock stagnant from slowing subscriptions, public sector offers hope – DA Davidson
On Thursday, DA Davidson adjusted its price target for C3.ai (NYSE:), a provider of enterprise AI software, to $20.00, down from the previous $30.00, while maintaining 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 reduction in subscription revenue of approximately $6.5 million quarter-over-quarter, a stark contrast to the addition of about $9.5 million in the last quarter and $5 million in the same period the previous year.
The company’s year-over-year subscription revenue growth slowed to 20%, down from 41%. However, this was somewhat mitigated by an increase in professional services, which allowed total revenue to grow by 21% year-over-year, a slight improvement from 20% in the previous quarter. Additionally, it was noted that revenue unrelated to Baker Hughes, a key partner, grew by 37% year-over-year.
C3.ai has seen positive developments in state and local government sectors, announcing several significant agreements. These new customers are reportedly progressing rapidly through the sales cycle, and C3.ai is planning to aggressively target 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 aimed at government programs, which is anticipated to be well-received by customers.
The company is set to increase its sales capacity in North America and Europe, and it 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 noted across various partners.
In other recent news, C3.ai, Inc. reported a first-quarter adjusted loss of $0.05 per share, surpassing analyst estimates of a $0.13 loss. The company’s revenue for the quarter was $87.2 million, a slight increase from the consensus estimate of $86.94 million and a 21% YoY growth 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 between $88.6 million and $93.6 million, with full-year revenue expected to range from $370 million to $395 million.
CEO Thomas M. Siebel noted the company’s solid start to the fiscal year, driven by rising demand for Enterprise AI. C3.ai also reported a 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 made significant strides in broadening its market presence, particularly in the Manufacturing and State and Local Government sectors, closing 71 agreements in the quarter, a 122% increase YoY. These are recent developments that reflect the company’s business performance and direction.
InvestingPro Insights
As C3.ai (NYSE:AI) navigates through a challenging period with shifts in subscription revenue, the latest data from InvestingPro provides additional context for investors considering the stock. With a market capitalization of $2.92 billion and a revenue growth of 16.41% over the last twelve months as of Q4 2024, the company shows some resilience despite market volatility. The gross profit margin stands at a healthy 57.49%, indicating a strong ability to control costs relative to revenue.
InvestingPro Tips highlight that C3.ai holds more cash than debt on its balance sheet, a sign of financial stability, and that analysts have revised their earnings upwards for the upcoming period, suggesting potential for future growth. However, it’s important to note that the company is not expected to be profitable this year, and the stock price has experienced significant volatility, with a price decrease of over 24% in the last three months. Investors should also be aware that C3.ai does not pay a dividend, which may be a consideration for those seeking income-generating investments.
For those interested in a deeper analysis, InvestingPro offers additional tips on C3.ai, providing a more comprehensive understanding of the company’s financial health and stock performance. With the next earnings date set for September 4, 2024, investors will be keenly watching for signs of improvement or further challenges ahead.
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