Title: Why C3.ai's Stock Tumbled Post Earnings Report
Title: C3.ai's Q2 Performance: Beating Expectations but Struggling with Profitability
C3.ai, the tech giant renowned for its artificial intelligence applications, reported its Q2 2025 earnings last night, surpassing expectations and sparking a series of analyst price target adjustments. However, despite the positive news and Wall Street's reaction, C3 stock is currently experiencing a downturn, with a 4.2% decrease as of 10:15 a.m. ET.
C3's Q2 Performance
C3.ai beat financial projections in the October-ended quarter, reporting $94.3 million in sales, surpassing the projected $91 million. The company also posted a non-GAAP loss of $0.06 per share, contrary to expectations of a $0.16 per share loss.
While this might seem impressive, it's important to note that the $0.06 loss was a non-GAAP figure, which isn't calculated according to generally accepted accounting principles (GAAP). When accounting for GAAP, the loss skyrocketed to a considerable $0.52 per share. This loss was nearly as high as the $0.59 per share loss in Q2 2024 and even surpassed the $0.50 per share loss in Q3 2024.
The fact that C3's revenue growth (a whopping 29% year over year) didn't significantly improve earnings raises concerns about the company's path to profitability.
Is C3 Stock a Sell?
The company's growth may also be slowing down.
Turning to guidance, management forecasts sales growth of approximately 25% for both Q3 2025 ($98 million) and the full fiscal year ($388 million). The company did not offer GAAP guidance for earnings but stated that it expects non-GAAP losses to continue in the near future: $42 million in Q3 losses and around $120 million lost for the year.
This short-term outlook is far from rosy, and the long-term prospects aren't much more encouraging. Analysts tracking C3 see the company continuing to incur losses through at least 2027. With such poor prospects, it's not hard to understand why investors are selling their C3.ai stock.
Yet, under the surface, there are promising signs that should not be overlooked.
Enrichment Insights
C3.ai, despite its current financial challenges, has a promising future ahead. Here's the breakdown:
- Sales Growth:
- Analysts anticipate that C3.ai will experience 25% revenue growth in FY 2025, followed by a slightly lower but still significant 22.3% growth in FY 2026.
- The company raised its FY 2025 revenue guidance to a range of $378 million to $398 million, indicating a potential growth of 21% to 28% year on year.
- Losses:
- Analysts foresee losses of around $0.62 in FY 2025 and $0.51 in FY 2026.
- Despite these losses, C3.ai is expected to make significant improvements, with a decrease in adjusted net loss per share from $0.13 in the previous year to $0.06 in the latest quarter.
- Cash Reserves and Liquidity:
- C3.ai boasts a strong balance sheet, holding $730.4 million in cash, cash equivalents, and marketable securities at the end of Q2 2025.
- The company aims to achieve positive free cash flow by the fourth quarter of FY 2025.
- Partnerships and Market Position:
- C3.ai's strategic partnership with Microsoft is projected to drive substantial growth, leveraging Microsoft's global reach and resources to fuel C3.ai towards profitability.
- The company's involvement in defense and public sector projects, including contracts with the U.S. Department of Defense, signifies its ability to land large, long-term agreements.
- Patent Portfolio and Innovation:
- C3.ai has made significant strides in generative and agentic AI, securing valuable patents that position it as a leader in the next wave of AI technology.
While C3.ai is still experiencing non-GAAP losses, its strong financial outlook, revenue growth, and strategic partnerships make it a compelling investment opportunity in the rapidly expanding enterprise AI market.
In light of C3.ai's impressive quarterly sales growth and non-GAAP financial projections, many investors are considering where to invest their money in the world of artificial intelligence. Despite the company's current financial challenges, analysts anticipate a potential 25% revenue growth in FY 2025, making it an appealing target for those interested in finance and investing in the tech sector.
As C3.ai strategically partners with Microsoft and lands major contracts, such as those with the U.S. Department of Defense, their patent portfolio in generative and agentic AI grows stronger. This promising future in the realm of AI technology could potentially lead to significant profits for those who choose to invest in the company.