C3.ai Stock Pops 8% After the Generative AI Player’s Annual Revenue Guidance Beats Wall Street’s Estimates
The enterprise AI software company has ramped up spending on generative AI growth initiatives, which is hurting its bottom line.
C3.ai (AI 13.84%) stock gained 8.3% in after-hours trading on Wednesday after the enterprise artificial intelligence (AI) software applications company released its fiscal 2024 fourth-quarter results.
For the quarter, which ended April 30, revenue and adjusted earnings beat Wall Street’s estimates, and management’s top-line guidance for C3.ai’s current quarter and fiscal 2025 also exceeded analysts’ consensus estimates. The biggest catalyst for the after-hours surge was likely the better-than-expected full-year outlook.
C3.ai’s key numbers
| Metric | Fiscal Q4 2023 | Fiscal Q4 2024 | Change* |
|---|---|---|---|
| Revenue | $72.4 million | $86.6 million | 20% |
| GAAP operating income | ($73.3 million) | ($82.3 million) | Loss widened 12% |
| Adjusted operating income | ($23.5 million) | ($23.4 million) | Approximately flat |
| GAAP net income | ($65.0 million) | ($72.9 million) | Loss widened 12% |
| Adjusted net income | ($15.2 million) | ($14.0 million) | Loss narrowed 8% |
| GAAP earnings per share (EPS) | ($0.58) | ($0.59) | Loss widened 2% |
| Adjusted EPS | ($0.13) | ($0.11) | Loss narrowed 15% |
Data source: C3.ai. Fiscal Q4 2024 ended April 30. GAAP = generally accepted accounting principles. *Calculations by author, except for revenue growth, which the company provided.
Wall Street was looking for an adjusted loss of $0.30 per share on revenue of $84.4 million. The company also beat its own guidance, which was for revenue of $82 million to $86 million and an adjusted operating loss of $43.5 million to $51.5 million.
C3.ai had been guiding for positive free cash flow (FCF) in the quarter, and it delivered, generating $18.8 million. The company ended its fiscal 2024 with cash, cash equivalents, and marketable securities of $750.4 million. It has no long-term debt.
What happened with C3.ai in the quarter?
- Subscription revenue surged by 41% year over year to $79.9 million, while professional services revenue declined by 57% to $6.7 million. Subscription revenue accounted for 92% of total revenue.
- The company closed 47 agreements, including 34 new pilots.
- Its partner-supported bookings surged 76%, and it closed 28 agreements through its partner network, including Amazon Web Services, energy company Baker Hughes, consulting company Booz Allen Hamilton, Alphabet‘s Google Cloud, and Microsoft.
- It closed 13 C3 Generative AI pilots, with clients including ExxonMobil, agricultural giant Cargill, and chemical company Dow. The company’s initial C3 Generative AI product was launched in March 2023.
Generative AI is the technology behind the immensely popular chatbot ChatGPT that launched in late 2022. This tech significantly increases the potential applications for AI. Nvidia is the biggest name in this market, as its cutting-edge graphics processing units can provide the processing power that generative AI software requires. Last week, the AI chip leader turned in another blockbuster quarterly report.
What the CEO had to say
In the earnings release, CEO Thomas Siebel said (in part):
Demand for Enterprise AI is intensifying, and our first to market advantage in Enterprise AI positions us well to capitalize on it. Our Enterprise AI applications have been adopted across 19 industries, underscoring increasing market diversity. Our federal revenue grew by more than 100% for the year. The interest we are seeing in our generative AI applications is staggering.
Guidance
|
Metric |
Fiscal Q1 2025 Guidance Range |
Fiscal Q1 2025 Projected Change (YOY)* |
Fiscal 2025 Guidance |
Fiscal 2025 Projected Change (YOY)* |
|---|---|---|---|---|
|
Revenue |
$84 million to $89 million |
16% to 23% |
$370 million to $395 million |
19% to 27% |
|
Adjusted operating income |
($22 million to $30 million) |
Loss widening by 6% to 45% |
($95 million to $125 million) |
Flat to loss widening by 32% |
Data source: C3.ai. YOY = year over year. *Calculations by author.
Prior to the report, Wall Street had been modeling for fiscal Q1 revenue of $85.9 million and an adjusted loss of $0.15 per share. So the company’s Q1 revenue guidance, at the midpoint of $86.5 million, came in a little better than the analysts’ consensus estimate. C3.ai doesn’t provide guidance for earnings.
Wall Street had also been projecting full-year fiscal 2025 revenue of $367.5 million and an adjusted loss of $0.40 per share. So, C3.ai’s full-year revenue outlook was notably better than analysts had expected.
Making progress
C3.ai made progress in the just-reported quarter, with year-over-year revenue growth accelerating and free cash flow solidly in positive territory. However, its adjusted EPS only narrowed slightly from the year-ago period. That’s because management decided last year to invest heavily in generative AI growth initiatives.
It’s naturally a big plus that C3.ai’s fiscal 2025 revenue guidance beat Wall Street analysts’ expectations. However, its 19% to 27% expected revenue growth is also coming with an adjusted operating loss that is projected to be flat at best and to widen by as much as 32% at worst. The big unknown is whether C3.ai will be able to scale up revenue and achieve positive adjusted earnings.
In my view, most investors considering opening a position in C3.ai would be well advised to monitor its progress for at least several more quarters before making an investment decision.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Beth McKenna has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends Booz Allen Hamilton and C3.ai and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
