C3.ai tops FQ2 estimates, misses on guidance; analysts remain bearish

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By Senad Karaahmetovic

Shares of C3.ai (NYSE:AI) are trading almost flat after the company reported results for its fiscal second quarter.

AI said its revenue rose 7% year-over-year to $62.4 million, beating the $60.82M consensus. The company also reported an adjusted loss per share of $0.11, better than the expected loss of $0.22 per share. Subscription revenue surged 26% YoY to $59.5M, topping the $50.4M consensus.

“It was a solid second quarter, with subscription revenue growing 26% year over year,” said CEO Thomas M. Siebel. “We made substantial progress ramping our consumption-based sales motion effort, which has been well received by our customers, partners, and sales organization. We expect consumption-based sales will be a substantial contributor to growth in forthcoming quarters.”

AI sees third-quarter revenue of $63M - $65M, lower than the consensus of $66.79M. The company expects to post an adjusted operating loss of $29M - $25M. For the year, the company sees revenue of $255M - $270M, again missing the average analyst estimate of $260.83M. The adjusted operating loss is seen between $98M and $85M.

Morgan Stanley analysts cut the price target by $1 to $12 per share and remain bearish on the AI stock.

“We reiterate our UW rating given the overhang created by the model transition and lack of visibility on accelerating top-line growth, but we are closely monitoring C3.Ai’s progress on the transition to consumption and on the path to profitability given an undemanding valuation at 2.5x CY24 sales,” they wrote in a note.

Bank of America analysts also slashed the price target on AI stock as they went to $14 from the prior $16 after “mixed” results.

“The stock remains a transition and a show-me story. We reiterate our Underperform rating and are lowering our PO to $14 from $16 (was 3.3x EV/C23e rev) for declining backlog as still limited visibility to key growth metrics during the transition. We look for improving sales productivity and revenue/RPO growth,” the analysts wrote.