C3ai Inc nyse Ai Stock Slides As Q2 Sales Misses Analysts Estimates

C3.ai, Inc. (NYSE: AI) Stock Slides as Q2 Sales Misses Analysts’ Estimates

Shares of C3.ai, Inc. (NYSE: AI) fell in extended trading Wednesday after the company posted quarterly revenue that fell below analysts’ expectations. The company also provided an outlook for the fiscal year, projecting an operating loss worse than initially anticipated.

C3.ai disclosed that the fiscal-year loss from operations, excluding certain items, could reach as high as $135 million, a significant increase from the previous forecast of $100 million. Analysts had estimated a loss of $87.6 million for the fiscal year ending in April.

The Redwood City, California-based company, renowned for its data management and analysis software, went public in 2020. In March, C3.ai launched products featuring generative AI, a type of software that generates text and images based on user prompts.

During an earnings call, CEO Tom Siebel revealed that the company would spend more funds than initially planned to capitalize on the burgeoning demand for generative AI products. However, this strategic move is expected to exert “short-term downward pressure on free cash flow and profitability.” He added that the company aims to achieve positive cash flow by the fiscal year ending in April 2025.

C3.ai, Inc. (NYSE: AI) stated that it is “in a prime position” to benefit from the growing adoption of AI in businesses and aims to achieve sustainable earnings while establishing a global market-leading position. Yet, Bloomberg Intelligence’s Sunil Rajgopal noted that the forecasted steeper-than-expected loss “illustrates the challenge in expanding market share.”

The company reported a 17% increase in fiscal second-quarter sales to $73.2 million, slightly below the analysts’ estimate of $74.3 million. The adjusted loss per share was 13 cents, better than the expected 18 cents loss. Revenue was affected by the setup of new AI governance departments by customers, causing delays and lengthening the normal sales cycle, according to Siebel.

Investors reacted swiftly to the news, with C3.ai shares plummeting to a low of $26.05 in extended trading after closing at $29.16 in New York. The stock had experienced a remarkable 161% gain throughout the year, reflecting Wall Street’s growing fascination for emerging technology.

Some investors, however, remain skeptical, making C3.ai, Inc. (NYSE: AI) the second most-shorted US technology stock, with nearly 36% of shares available for public trading being shorted, according to data from S3 Partners. The company recently underwent workforce cuts and spoke of the need for cost savings.

European sales teams “did not perform well,” Siebel said in an interview on CNBC. “We implemented a reorganization there to get it back on track.”

The company reported closing 62 customer agreements in the quarter, with the majority falling under the categories of pilot programs or having a total contract value below $1 million, as outlined in an investor presentation. Among these agreements, twelve were valued at over $1 million, and one deal surpassed the $5 million mark.

Last month, C3.ai announced its software would be available on the marketplace of Amazon.com Inc.’s cloud computing unit, Amazon Web Services, indicating efforts to expand its market reach. However, C3.ai’s ability to convert software trials into long-term customers remains a focal point for Wall Street analysts.