C3.ai Reports Smaller Loss and Strong Revenue Growth in Q2 Fiscal 2025
C3.ai reported a loss of 6 cents per share for the fiscal second quarter of 2025, outperforming the Zacks Consensus Estimate, which projected a loss of 16 cents. In the same quarter last year, the company recorded a non-GAAP loss of 13 cents per share.
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Revenue reached $94.34 million, reflecting a 29% increase compared to the previous year and surpassing the Zacks Consensus Estimate by 3.66%. The growth was driven by increased demand for the company’s enterprise AI solutions, especially C3 Generative AI.
During this quarter, C3.ai secured 58 agreements, with 36 focused on pilot projects, indicating a strong interest in their Enterprise AI and Generative AI offerings.
C3.ai, Inc. Price, Consensus, and EPS Surprise Chart
C3.ai price-consensus-eps-surprise-chart | C3.ai Quote
The company raised its guidance for the fiscal third quarter and the full year 2025, a positive sign for investors. Year-to-date, C3.ai shares have risen by 45.2%, significantly outperforming the Computer & Technology sector’s 33% increase.
Q2 Earnings Highlights
C3.ai’s subscription revenues, which make up 86% of total revenues, increased by 22.1% year over year to $81.2 million. Professional services revenue, accounting for 14% of revenues, skyrocketed by 94.3% to $13.2 million.
The non-GAAP gross margin for this quarter stood at 70%, a slight improvement over 69% from the same quarter last year.
Research and development expenses rose by 10.5% year on year to $55.7 million, while general and administrative costs grew by 7.7% to $21.8 million. Sales and marketing expenses also saw an increase of 11.5%, totaling $55.6 million.
For the fiscal second quarter, C3.ai reported a non-GAAP loss from operations of $17.2 million, a decrease from the $25 million loss in the same quarter last year.
Growing Client Base Fuels C3.ai’s Success
C3.ai has emerged as a leading player in the AI market, attributed to rising demand for its Generative AI solutions and partnerships with major cloud services like Amazon AMZN, Alphabet GOOGL, and Microsoft MSFT.
A notable 62% of the company’s agreements in the second quarter stemmed from partnerships with Google Cloud, Amazon Web Services (AWS), and Microsoft Azure. This reliance on their partner network is key to driving revenues and solution adoption.
The firm closed 20 agreements in collaboration with Google Cloud in the reported quarter, reflecting a staggering 180% increase from the prior year. C3.ai was also featured at Google’s Public Sector Summit in Washington, DC, hosting six executive roundtable discussions throughout North America and Latin America.
The partnership with Microsoft continues to expand, leveraging Microsoft’s Azure platform to broaden its AI solutions and client reach.
Furthermore, C3.ai has seen increased contracts with significant clients such as Exxon Mobil, Shell, Rolls-Royce, Coca-Cola, and the U.S. Department of Defense, indicating a strong industry trend toward adopting AI technologies.
C3.ai’s Financial Position
As of October 31, 2024, C3.ai held total cash, cash equivalents, and marketable securities of $730.4 million, a decline from $762.5 million as of July 31, 2024.
The cash flow from operations reported a $30.6 million outflow, compared to an outflow of $8.04 million in the previous quarter.
Looking Ahead: FY25 Guidance
For the third quarter of fiscal 2025, C3.ai anticipates revenues between $95.5 million and $100.5 million, with a non-GAAP loss from operations projected to fall between $38.6 million and $46.6 million.
For full fiscal year 2025, the expected revenue is between $378 million and $398 million, with the non-GAAP loss expected in the range of $105 million to $135 million.
What Should Investors Consider Regarding C3.ai Stock?
Currently, C3.ai stock poses a challenge for value investors as it carries a Value Score of F, indicating an inflated valuation at this time.
Nonetheless, strong demand for its AI solutions and a growing partner network suggest that C3.ai can continue to drive revenue growth and enhance long-term prospects.
Investors who already own the stock may find assurance in the company’s growth potential moving forward. C3.ai is rated Zacks Rank #2 (Buy) and carries a Growth Score of A, making it a compelling investment opportunity, according to the Zacks Proprietary methodology.
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