C3.ai Prepares for Q3 Fiscal 2025 Earnings Announcement
C3.ai AI will announce its results for the third quarter of fiscal 2025 on February 26.
Discover the latest EPS estimates and surprises on Zacks Earnings Calendar.
In its earnings report, C3.ai anticipates revenues in the range of $95.5 million to $100.5 million.
The Zacks Consensus Estimate for revenue stands at $97.97 million, illustrating an impressive projected increase of 27.96% compared to the same quarter last year.
C3.ai, Inc. Price and EPS Surprise
C3.ai, Inc. price-eps-surprise | C3.ai, Inc. Quote
The consensus estimate for loss has remained constant over the past month at 25 cents per share, reflecting a sharp decline of 92.31% year-over-year.
Historically, C3.ai has surpassed the Zacks Consensus Estimate in each of the last four quarters, achieving an average earnings surprise of 60.53%.
Now, let’s examine some key factors that may have impacted performance ahead of the announcement.
What to Expect from C3.ai’s Earnings
C3.ai’s third-quarter results are likely to benefit from the success of its C3 Generative AI solutions and a growing demand for its Enterprise AI software.
The excitement surrounding generative AI solutions, particularly C3 Generative AI, which tackles challenges connected to large language models, is anticipated to enhance the company’s performance this quarter.
Interest in generative AI applications is on the rise, especially within manufacturing, pharmaceuticals, and energy sectors. C3.ai’s Generative AI Accelerator program, designed to expedite AI integration for organizations, is expected to foster new contracts and transitions from pilot projects to wider applications.
The company’s strategic move to diversify its customer base across various industries, including defense, aerospace, and pharmaceuticals, is expected to be instrumental in driving revenue growth.
In the second quarter, C3.ai secured 58 agreements, featuring collaborations with major companies such as Exxon Mobil, Dow, Rolls-Royce, and Duke Energy, setting a strong foundation for growth going forward.
In 2023, C3.ai shares have declined by 8.3%, trailing behind the Zacks Computer & Technology sector, which has recorded a modest gain of 0.8%.
Year-to-Date Performance
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C3.ai’s stock appears to be trading at a premium, exhibiting a Value Score of F, which indicates a potentially overvalued position.
The stock trades at a forward 12-month Price/Sales ratio of 7.95X, surpassing the sector average of 6.45X.
Price/Sales (F12M)
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C3.ai’s Expanding Network Enhances Outlook
C3.ai has emerged as a noteworthy player in the AI sector due to increasing demand for its Generative AI solutions and a robust partner network that features major cloud providers like Amazon AMZN, Alphabet GOOGL, and Microsoft MSFT. This extensive collaboration is expected to have fueled growth in the most recent fiscal quarter.
Partnerships with leaders such as Google Cloud, Amazon Web Services, and Microsoft Azure accounted for 62% of C3.ai’s agreements in the second quarter of fiscal 2025, demonstrating how crucial these partnerships are to revenue generation.
Collaboration with Google Cloud resulted in 20 new agreements, representing a significant 180% increase year-over-year and highlights C3.ai’s rising profile in the industry.
Strengthened relationships with Microsoft Azure are promising, as they enhance C3.ai’s sales reach. Microsoft’s global sales teams actively promoting C3.ai solutions are likely to lead to increased enterprise adoption and accelerated sales cycles, translating to higher revenues in the upcoming quarter.
Government Sector Expansions Present New Opportunities
C3.ai’s expanding footprint in the government and defense sectors, which includes new contracts with U.S. federal agencies, offers a continuous revenue stream. Sustained federal investments in AI indicate further growth prospects in the third quarter of fiscal 2025.
In December 2024, a notable contract was secured in partnership with ECS, aimed at modernizing information management systems for the U.S. Army.
This task order emphasizes deploying the AI-powered C3 AI Decision Advantage application to streamline intelligence operations and lessen the burden on soldiers.
Furthermore, strong growth in C3.ai’s federal business was observed in the second quarter with expanded agreements involving the U.S. Department of Defense, Air Force, Navy, Army, Marine Corps, and several other agencies.
Investor Considerations for C3.ai
While demand for C3 Generative AI solutions and a broader partner base signal strong potential, C3.ai faces stiff competition in the enterprise AI market, posing challenges to their expansion efforts.
To solidify its market position, C3.ai plans to invest heavily in its offerings, but this strategy may pressure profit margins in the near term, presenting risks for investors.
Furthermore, broader economic uncertainties are impacting development and integration of AI across sectors. Concerns over valuation also linger.
C3.ai currently holds a Zacks Rank #3 (Hold), suggesting investors may want to wait for more favorable conditions before buying the stock. For more insights, view today’s complete list of Zacks #1 Rank (Strong Buy) stocks here.
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This article was originally published on Zacks Investment Research (zacks.com).
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The views and opinions expressed here are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.
