The AI boom is not lifting every boat. Today, C3.ai stock (AI) dropped sharply after the company released a disappointing financial report for its Fiscal third quarter. While giants like Nvidia (NVDA) are seeing record sales, C3.ai is struggling with falling revenue and growing losses. The news was so poorly received that AI shares tumbled to $8.25, wiping out over a year of gains in a single day.
Claim 55% Off TipRanks
New trading tool for NVDA bearsC3.ai’s Restructuring Plan Triggers Massive Layoffs
The most shocking part of the report was the company’s plan to overhaul its entire business. CEO Stephen Ehikian, who took over the top spot six months ago, announced that C3.ai is cutting about 26% of its total staff. This move is part of a larger strategy to save $135 million a year and try to finally turn a profit.
Reorganizing the company means flattening the sales team and focusing only on the products that actually make money. During the earnings call, Ehikian discussed the internal issues he found upon taking the job, stating, “It was clear to me that we were not organized appropriately.” The company hopes to become more “agile” and survive the intense competition in the enterprise software market through these job cuts and a reduction in office expenses.
C3.ai’s Revenue Miss Rattles Investor Confidence
The financial numbers for the quarter were much lower than anyone expected. C3.ai reported only $53.3 million in total revenue, which is a huge 46% drop from the $98.8 million it made in the same quarter last year. Most of this money comes from subscriptions, but even those sales are shrinking.
Missing the mark by $22 million has left Wall Street very skeptical. Analysts had expected the company to report at least $75 million in sales. Because C3.ai is losing money faster than it is making it, the company burned through $53 million in cash this quarter alone. Even though they still have about $621 million in the bank, investors are worried that the company is running out of time to fix its broken sales model.
Federal Deals Provide a Small Spark
Despite the gloom, there was one bright spot in the report. The company saw a massive 134% jump in bookings from the federal government and defense agencies. Deals with the U.S. Department of Agriculture and NATO now make up more than half of all the new business the company is signing.
Winning these large government contracts shows that there is still demand for C3.ai’s technology in high-security sectors. However, these deals take a long time to turn into actual cash. Until the company can show that it can win regular business from private companies as well, the stock will likely stay under pressure. For the time being, the new CEO has a very long to-do list to prove that C3.ai belongs in the same conversation as the AI winners.
Is C3.ai a Good Stock to Buy?
On TipRanks, C3.ai stock (AI) commands a Strong Buy consensus rating based on one Buy, six Hold, and five Sell ratings. The average 12-month AI price target of $9.11 implies 9.4% upside potential from current levels. Over the past year, AI shares have fallen 61%.
