C3.ai Shows Strong Growth Amid Market Challenges
C3.ai has seen its shares rise by 12.4% over the past month, outperforming the Zacks Computer and Technology sector’s growth of 4.6% and the Zacks Computers – IT Services industry’s increase of 5.8%.
C3.ai has emerged as a leading AI stock, driven by a significant demand for its C3 Generative AI solutions and a growing partnerships network that includes major cloud providers such as Amazon AMZN, Alphabet GOOGL, and Microsoft MSFT.
The expanding collaborations with these cloud giants paint a positive picture for C3.ai’s future. In the first quarter of fiscal 2025, the company secured 51 agreements through its partnership network, marking a remarkable increase of 155% from the previous year and 82% from the prior quarter.
C3.ai also completed 71 agreements in the latest quarter, adding notable names like GSK, Eletrobras, Valero, Swift, SmithRx, Sanofi, the U.S. Intelligence Community, the U.S. Department of Defense, Dolce & Gabbana, and Ingersoll Rand.
Recent Performance Highlights
Image Source: Zacks Investment Research
A Robust Network Bolsters C3.ai’s Future
C3.ai continues to enhance its relationships with these cloud partners. Recently, it achieved AWS Generative AI competency, further solidifying its collaboration with Amazon.
The Amazon Web Services (“AWS”) Competency Program aids customers by connecting them with partners like C3.ai, which brings extensive expertise in implementing AWS technologies to adopt generative AI solutions.
A significant development has been the launch of C3 Generative AI for Government Programs, a sophisticated AI application operating on Alphabet’s Google Cloud, aimed at assisting government entities in efficiently communicating accurate information to the public.
This new solution is expected to enhance C3.ai’s presence in government sectors. In the first fiscal quarter, over 30% of C3.ai’s bookings originated from federal contracts, including agreements with the United States Air Force, U.S. Navy, U.S. Marine Corps, and the U.S. Intelligence Community.
The company secured 25 deals with state and local agencies across various states, including Texas, California, New Jersey, and Florida in the first quarter of fiscal 2025.
C3.ai: A Promising Portfolio Fuels Growth
C3.ai’s expanding customer base and increased adoption of its Enterprise AI software stand out as strong points for investors.
C3 Generative AI is currently utilized in the manufacturing, industrial, and military sectors, boosting safety standards and analyzing crucial operational data. However, C3.ai anticipates challenges in gross margins due to the high costs associated with pilot programs in the customer lifecycle.
Investments aimed at enhancing sales capacity, research and development, and marketing are likely to put pressure on operating margins. The company plans to grow its sales force in North America, Europe, and the public sector.
While negative free cash flow is expected for the second and third quarters of fiscal 2025, positive free cash flow is anticipated in the fourth quarter.
C3.ai’s Ambitious Revenue Goals
For fiscal 2025, C3.ai projects revenues to fall between $370 million and $395 million, translating to a year-over-year increase ranging from 19% to 27%.
The company’s non-GAAP loss from operations is estimated to be between $95 million and $125 million for the fiscal year.
In the second quarter, C3.ai expects revenues between $88.6 million and $93.6 million, along with a projected non-GAAP loss from operations of $26.7 million to $34.7 million.
The Zacks Consensus Estimate for fiscal 2025 revenues stands at $383.44 million, reflecting an anticipated growth of 28% from the previous year. Meanwhile, the loss consensus has narrowed slightly to 53 cents per share over the last month.
The forecast for second-quarter fiscal 2025 revenues is currently set at $91.01 million, indicating a significant growth of 24.28% compared to the same period last year.
C3.ai, Inc. Price and Consensus
C3.ai, Inc. price-consensus-chart | C3.ai, Inc. Quote
C3.ai shares are currently deemed overvalued, indicated by a Value Score of F.
The stock trades at a forward 12-month Price/Sales ratio of 7.82X, which exceeds the broader sector’s ratio of 6.1X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
Conclusion
C3.ai’s strategy to invest heavily for market share may place pressure on margins in the short term. Although the demand for its C3 Generative AI solutions and expanding partner network is strong, these challenges could affect the stock’s performance soon.
C3.ai currently holds a Zacks Rank of #3 (Hold), indicating that it may be prudent to await a more favorable moment for potential stock purchases.
You can view the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Just $1 for Full Access to Zacks’ Insights
We’re serious.
Years ago, we surprised our members by offering a 30-day trial to access all our selections for just $1. No hidden costs.
Thousands embraced this opportunity, while others were skeptical about its legitimacy. We do have a purpose: we want you to experience our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators, and more, which have realized 228 positions with substantial gains in 2023 alone.
See Stocks Now >>
Interested in the latest recommendations from Zacks Investment Research? Download our report on 5 Stocks Set to Double today.
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Microsoft Corporation (MSFT): Free Stock Analysis Report
C3.ai, Inc. (AI): Free Stock Analysis Report
Alphabet Inc. (GOOGL): Free Stock Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
