C3.ai (AI) Stock Plunges 20% on Slashed Revenue Outlook

  • Shares of artificial intelligence (AI) specialist C3.ai (AI) are down big on Thursday.
  • The company released mixed results for its fiscal first-quarter earnings and lowered sales guidance.
  • AI stock faces a hazy future as C3.ai changes business models.
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Enterprise-level artificial intelligence (AI) provider C3.ai (NYSE:AI) is the latest company to admit it has been facing economic pressures. Yesterday, it released a disappointing first-quarter earnings report, leading to steep losses for AI stock.

Ahead of C3.ai’s Q1 disclosure, covering analysts anticipated that C3.ai would produce an earnings loss of 26 cents per share, adjusted for non-recurring items. However, the actual loss came out to 12 cents per share. This stat also compares favorably against the year-ago loss of 23 cents. Further, over the last four quarters, Zacks Equity Research notes that the company beat consensus targets all four times.

However, the revenue front produced a slight disappointment for the company. C3.ai generated sales of $65.31 million during the period, missing the consensus target by 0.58%. That said, the year-ago comparison was favorable; the company posted revenue of $52.41 million in Q1 2021. Overall, C3.ai has topped revenue estimates “three times over the last four quarters.”

Unfortunately for AI stock, though, management slashed its expectations for sales. According to Barron’s, the company now anticipates “revenue of $60 million to $62 million, below the consensus of $71.7 million, with a non-GAAP loss of $15 million to $20 million” for fiscal Q2. In addition, C3.ai expects full fiscal-year revenue of between $255 million and $275 million, “down from a previous range of $308 million to $316 million.” The company also foresees a “full-year non-GAAP loss from operations of $90 million to $98 million.”

Shifting Gears Could Impact AI Stock Moving Forward

More surprises awaited market observers of AI stock in the Q1 report, however. CEO Thomas Siebel had the following to say:

“The economic downturn is real. Our customers are scrutinizing big deals as never before, which also makes this a smart time to launch consumption pricing.”

As Barron’s points out, consumption pricing is “basically a utility model, like water or electricity. The more computing power used, the more paid.” C3.ai’s leadership team notes that some major tech firms have already adopted this business model. Examples include Snowflake (NYSE:SNOW), Google Cloud (under Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)), Amazon (NASDAQ:AMZN) AWS and Microsoft (NASDAQ:MSFT) Azure.

In theory, C3.ai will be able engage the troubled market with a more efficient service profile via this model. Rather than pricing out enterprise-level clients with a flat subscription fee, they can pay as they go. At the same time, though, this pivot comes late compared to the competition. C3.ai also acknowledges the pain affecting even the biggest industry stalwarts. Still, Siebel stated:

“With 80% non-GAAP gross margins, and more than $930 million in cash reserves, we are well positioned to weather market headwinds. Moreover, we are accelerating our planned path to profitability, aiming to be non-GAAP profitable during FY 2024.”

Whether investors will accept this new narrative remains to be seen. AI stock slipped in the morning session and is currently down 20% this afternoon.

On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2022/09/c3ai-ai-stock-plunges-20-percent-on-slashed-revenue-outlook/.

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