C3.ai stock slumps 16% as sequential subscription revenue decline offsets Q1 beat

NEW YORK - C3.ai, Inc. (NYSE:AI ), the Enterprise AI application software company, saw its stock plummet over 16% in premarket trading Thursday despite beating earnings expectations, as investors focused on the company's cautious outlook.

The company reported a first-quarter adjusted loss of $0.05 per share, significantly better than the analyst estimate of a $0.13 loss. Revenue for the quarter came in at $87.2 million, slightly above the consensus estimate of $86.94 million and up 21% YoY from $72.4 million.

Subscription revenue stood at $73.5 million, up 20% year-over-year but well below the 41% growth in the previous quarter. The increase was also 8% below consensus estimates.

"While revenue accelerated for the 6th qtr. in a row, this was driven by services as software revenue came in below consensus," Morgan Stanley analysts said in a post-earnings note.

They noted a strong momentum in signed agreements, pilots, and partner contributions during the quarter, but reiterated an Underweight rating on the stock due to "substandard revenue growth plus operating margins."

C3.ai's guidance for the second quarter and full fiscal year 2025 fell short of market expectations. The company forecasts second-quarter revenue between $88.6 million and $93.6 million, compared to the analyst consensus of $91 million. For the full fiscal year 2025, C3.ai expects revenue in the range of $370 million to $395 million, versus the consensus estimate of $383.4 million.

Thomas M. Siebel, Chairman and CEO of C3.ai, commented on the results, stating, "We had a solid start to the fiscal year, with rising demand for Enterprise AI driving our sixth consecutive quarter of accelerating revenue growth."

The company 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.

C3.ai highlighted significant progress in broadening its market presence, particularly in Manufacturing and State and Local Government sectors. The company closed 71 agreements in the quarter, a 122% increase YoY, including 52 pilots, up 117% YoY.

Analysts at Wolfe Research maintained an Underperform rating on C3.ai shares as record new lands in pilots/trials and agreements "did not translate into the subscription revenue contribution investors wanted."

"While the services revenue share of 16% was within AI's prior guidance, a sequential decline in subscription revenue, despite strength in new pilots and agreements, does not increase our confidence in AI's transition driving recurring subscription revenue growth," analysts wrote. 

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Source: Investing.com