C3.ai falls on disappointing sales outlook after rallying to AI hype

(Bloomberg) – C3.ai Inc. plunged 20% in extended trading after providing a full-year revenue outlook below analysts’ estimates, fueling concerns that the artificial intelligence software company could be failed to live up to investor enthusiasm which has seen its stock price more than triple this year.

Bloomberg’s Most Read

Sales will rise 11% to 20% to a midpoint of $307.5 million in the fiscal year ending April 2024, the Redwood City, Calif.-based company said Wednesday in a communicated. Analysts estimated an average of $317 million, according to data compiled by Bloomberg. The company forecast an adjusted loss of $50 million to $75 million in the year, which is in line with estimates.

The shares fell to a low of $31.10 in extended trading after closing at $40.01 in New York. As investors have developed an insatiable appetite for AI, the company’s stock has jumped 258% this year, making it the best performing stock in the S&P North American Expanded Technology Software Index. C3.ai has jumped 45% just since Nvidia Corp’s hit earnings. last week, which boosted a basket of AI-related stocks.

Still, many are betting against the company. Short interest amounted to about 29% of publicly available shares as of May 24, according to data from S3 Partners. Activist investors have accused the company of following trends and employing poor accounting practices. Former employees said C3.ai had routinely overestimated its technology readiness in the past, despite founder and CEO Tom Siebel defending his company’s products and practices.

“The C3 AI platform is increasingly recognized as the benchmark for enterprise AI,” Siebel said in the release. “We have over 40 production enterprise AI applications that deliver rapid ROI to the market.”

Much of the investor interest is in C3.ai’s new generative artificial intelligence “product suite,” which launched in March. The company said it entered into AI application agreements with Georgia-Pacific, Flint Hills Resources and the U.S. Department of Defense Missile Defense Agency during the quarter. It previously announced it had three clients when it released preliminary quarterly results earlier this month.

Read more: C3.ai criticized for product delays, Tom Siebel micromanagement

“We’re a bit shocked by the response we’ve had to the C3 generative AI,” Siebel said on a conference call after the results were released. The company’s products and relationships should help it capitalize on new interest in AI, DA Davidson analyst Gil Luria wrote in a note.

Not all analysts are convinced that the new technology will be revolutionary for C3.ai.

“The results confirm that C3.ai likely has very low revenue exposure to generative AI or large language models,” Bloomberg Intelligence’s Mandeep Singh said of the three revenue-constrained pilots. “C3 is still heavily focused on the energy sector and I don’t see it expanding into all sectors given competition from large-scale cloud providers and other large application software vendors.”

C3.ai has struggled to sign major new customers and recently switched to consumption pricing – paying for usage-based software rather than a flat-rate subscription – to woo companies that are reluctant to commit. in big deals. The company said it signed 43 deals in the quarter, including 19 pilots, and said the average sales cycle would shorten to 3.7 months from 5 months in the same period a year ago.

Chief Financial Officer Juho Parkkinen said the company continues to expect to be profitable on an adjusted basis by the fourth quarter of 2024. He added that C3.ai plans to “aggressively invest in growth initiatives.” ‘Generative AI in the first half of the year’.

(Updates with leaders’ comments beginning with the sixth paragraph.)

Bloomberg Businessweek’s Most Read

©2023 Bloomberg LP

Leave a Comment