C3.ai Inc. gave a lackluster sales forecast and said profitability will take longer than expected, fueling anxiety the software company is struggling to capitalize on enthusiasm for artificial intelligence.
(Bloomberg) — C3.ai Inc. gave a lackluster sales forecast and said profitability will take longer than expected, fueling anxiety the software company is struggling to capitalize on enthusiasm for artificial intelligence.
The fiscal-year adjusted loss will be as much as $100 million, the Redwood City, California-based company said Wednesday in a statement. It previously forecast a loss of as much as $75 million. C3.ai said it no longer expects to make a profit on an adjusted basis in the fiscal fourth quarter due to new investments in sales and marketing related to its generative AI products.
“The market opportunity is immediate, and we intend to seize it,” Chief Executive Officer Tom Siebel said Wednesday on a conference call, explaining the higher expenses. Siebel said C3.ai still will be cash flow positive in the fourth quarter and in fiscal year 2025.
Some investors remain skeptical that the company, whose ticker is literally “AI,” will be able to live up to the hype. It is the most-shorted US tech stock as a percentage of shares traded, with 33% of shares available to the public shorted Wednesday, according to data from S3 Partners. Former employees have criticized C3.ai and Siebel for exaggerating the readiness of its technology, while two prominent short-sellers have released critical reports.
Shares dropped about 6.5% in extended trading after closing at $31.46 in New York. The stock has almost tripled this year as investors developed an insatiable appetite for AI, making it one of the best-performing companies in the S&P North American Expanded Technology Software Index.
C3.ai projected sales of $72 million to $76.5 million in the current period ending in October, compared with analysts’ average estimate of $73.9 million. The company maintained its annual sales outlook of $295 million to $320 million, with the midpoint in line with the average projection of $307.3 million
In the fiscal first quarter, sales increased 11% to $72.4 million, beating analysts’ average estimate of $71.6 million. The adjusted loss was 9 cents per share, compared with the average projections of a loss of 17 cents. Remaining performance obligation, an indicator of contracted sales, was $334.6 million, short of the $382.2 million expected by analysts.
The small first-quarter revenue beat “may not be enough to ward off skepticism about long-term growth prospects,” wrote Sunil Rajgopal, an analyst at Bloomberg Intelligence. A crucial question for C3.ai’s trajectory is its ability to sign and expand business with new high-quality customers, he wrote in a July report.
The company said it closed 32 customer agreements in the quarter. It had 70 paid tests of its products — called active pilots — at the end of the period on July 31, Chief Financial Officer Juho Parkkinen said during the call.
Its most-important client, oil field contractor Baker Hughes Co., sold about a third of its stake in the company earlier this year. Baker Hughes is no longer a “related party” because it’s ownership threshold has slipped below 5%, Siebel said.
–With assistance from Carly Wanna.
(Updates with comments from analyst in the eighth paragraph.)
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