Comparing C3.ai and Palantir: Two Leaders in AI Software

C3.ai and Palantir Technologies PLTR are key players in the growing enterprise AI software sector. C3.ai provides a wide range of AI tools for businesses, while Palantir specializes in data analytics platforms utilized by government and corporate clients. Both companies focus on leveraging big data and AI to enhance operational efficiency and have garnered investor attention during the AI surge.

In recent quarters, both companies have regained growth momentum, though their stock performances have experienced volatility. Palantir’s Stock skyrocketed by 340.5% in 2024, whereas C3.ai saw an increase of nearly 20%. Year-to-date, Palantir’s Stock is up 53.5%, while C3.ai shares have fallen by 34.6%.

C3.ai & Palantir Stocks Performances

Image Source: Zacks Investment Research

With the excitement surrounding enterprise AI and the companies’ distinct approaches, it’s a suitable time to assess which stock might present a stronger investment opportunity. This analysis will closely compare their fundamentals to find the better option.

The Case for C3.ai Stock

C3.ai is a dedicated enterprise AI software provider established by tech leader Tom Siebel. The company delivers over 100 pre-built AI applications across various industries, such as energy and finance, along with a platform that enables clients to create their AI solutions. Its strategy focuses on partnerships with major cloud services and government entities. Notably, C3.ai is the leading AI application on Microsoft’s MSFT Azure cloud marketplace and has partnered with Alphabet’s GOOGL Google Cloud. Following an expanded alliance with Microsoft in late 2024, C3.ai secured 28 new contracts across nine industries. Their collaboration shortened sales cycles by around 20%, highlighting the strength of their joint market approach. As of the end of Q3, C3.ai and Microsoft were engaged in over 600 active enterprise opportunities globally. These partnerships not only widen their sales avenues but may also enhance margins through reliance on partners’ infrastructure.

Moreover, C3.ai has secured expanded contracts with the U.S. Department of Defense and additional military branches, indicating increased traction in government sectors, traditionally dominated by Palantir.

In its fiscal third-quarter results, C3.ai reported total revenues of $98.8 million, reflecting a 26% year-over-year increase. Subscription revenues rose by 22% year over year to reach $85.7 million, accounting for 87% of total revenues. The company finalized 66 agreements, with 50 being pilot projects, marking a 72% year-over-year increase. This expansion in partnerships and pilot programs signifies growing acceptance in commercial and government sectors. Revenue from software demonstration licenses amounted to $28.6 million, as these licenses are provided to strategic partners like Microsoft and Amazon’s AWS, enabling them to independently showcase C3.ai’s applications to potential enterprise clients.

Nonetheless, C3.ai faces substantial hurdles, particularly achieving sustainable profitability amid fierce competition. The company anticipates some decline in gross margins due to an increased share of expensive pilot projects. It also foresees modest reductions in operating margins in the near future as investments in business growth intensify.

Though the absence of profits poses a risk, C3.ai’s improving revenue trajectory and focused strategy on enterprise AI could lead to future profitability as the company scales. Its Stock valuation appears more appealing compared to Palantir’s, potentially offering more growth as the company successfully executes its strategy. The forward 12-month P/S ratio is 6.29, which is slightly above the sector average of 5.6.

The Case for Palantir Stock

Palantir stands as a giant in enterprise analytics and AI platforms, significantly surpassing C3.ai in scale. Its Gotham platform has become indispensable for agencies like the DoD and CIA, creating a robust competitive advantage in government contracting. Recently, Palantir has aggressively expanded into commercial markets with its Foundry platform and new Artificial Intelligence Platform (AIP), aiming to establish itself as a key provider of AI-driven decision-making tools for large enterprises.

The company’s primary strength lies in its long-term customer relationships and the diversity of its offerings. Palantir’s contracts with government clients provide a stable revenue base, while its focus on commercial AI is gaining momentum with AIP, facilitating organizations’ deployment of large language models and automation. As a result, Palantir experienced growth acceleration from 17% in 2023 to 29% in 2024.

Unlike C3.ai, Palantir is already profitable. It achieved GAAP profitability in 2023, which continued into 2024, allowing the company to self-fund growth. Its adjusted operating income and margins have improved significantly, as Palantir now emphasizes disciplined cost management while investing in R&D.

This success has led to a higher valuation, with the Stock trading at a significant forward earnings multiple, which leaves little room for setbacks. The forward 12-month P/S ratio stands at 66.2, markedly above the sector average of 5.6, indicating a premium that suggests investors expect aggressive growth, especially in the AI and government sectors.

However, Palantir faces challenges in retaining its growth pace as a larger company and dealing with its heavy dependence on government contracts, which introduces political and budgetary risks.

Earnings Estimates Trend for AI and PLTR Stocks

Over the last 30 days, the Zacks Consensus Estimate for PLTR has decreased, while the estimate for AI Stock has remained unchanged for 2025, as illustrated below.

For PLTR Stock

Image Source: Zacks Investment Research

For AI Stock