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On Thursday, JPMorgan analyst Pinjalim Bora adjusted the price target for C3.ai (NYSE:AI) shares, reducing it to $23.00 from the previous $27.00, while maintaining a Neutral rating on the stock. The stock, currently trading at $23.02, has shown significant volatility, having declined 38% over the past six months. The revision followed C3.ai’s quarterly financial report, which presented a mix of results. The company’s total revenue exceeded expectations but revealed a dependency on professional services for its outperformance. Subscription revenue, a key metric for the company’s growth, fell short of consensus estimates by 9%. According to InvestingPro data, the company maintains strong liquidity with a current ratio of 6.74, though analysts remain cautious about its near-term profitability prospects.
C3.ai’s overall revenue showed a 26% year-over-year increase, consistent with the previous quarter’s growth, with total revenue reaching $366.92 million in the last twelve months. However, the company’s subscription revenue growth slowed to 9% year-over-year, a notable drop from the 22% growth in the previous quarter. This deceleration is a concern as subscription services are a critical aspect of C3.ai’s business model. A portion of the subscription revenue includes demo licenses, which are non-recurring and accounted for approximately 40% of the total subscription revenue. These licenses contributed to all the sequential growth in subscription revenue, which, if excluded, would indicate a decline. For deeper insights into C3.ai’s financial health and growth prospects, InvestingPro subscribers can access exclusive analysis and additional ProTips.
The company’s Prioritized Engineering Services (PES) revenue exceeded expectations, contributing significantly to the professional services segment’s performance, which surpassed consensus estimates by more than 75%. This surge helped to compensate for the underwhelming subscription figures. Despite better-than-expected profitability for the quarter, C3.ai’s operating margins remained deeply negative.
In his analysis, Bora acknowledged C3.ai’s pursuit of a substantial and evolving market in Artificial Intelligence and noted the company’s strategic partnerships. Nonetheless, the analyst expressed concerns over the stock’s potential performance due to the lack of core subscription growth, the irregularity of professional services revenue, and the company’s weak profitability profile.
In other recent news, C3.ai reported its fourth-quarter fiscal year 2025 financial results, which exceeded analysts’ expectations. The company announced a non-GAAP EPS of ($0.16), surpassing the consensus estimate of ($0.20), and achieved revenue of $109 million, slightly above the forecast of $108 million. This performance marks a 26% year-over-year revenue increase. Despite subscription revenue coming in at $87 million, below the $96 million consensus estimate, it still represented a 9% year-over-year growth. C3.ai also renewed and expanded its strategic partnership with Baker Hughes (NASDAQ:BKR), a key factor in its success within the oil and gas sector. JMP analysts maintained a Market Outperform rating for C3.ai, with a $50 price target, citing confidence in the company’s financial outcomes and strategic partnerships. The company provided guidance for Q1 FY2026, projecting revenue between $100 million and $109 million, with full-year FY2026 guidance ranging from $447.5 million to $484.5 million. C3.ai aims to achieve non-GAAP profitability in the second half of FY2027 and anticipates free cash flow positivity by Q4 FY2026.
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