C3.ai Faces Financial and Market Challenges Amidst AI Advancements: Analyst Recommends Sell Rating

In a report released today, Bradley Sills from Bank of America Securities reiterated a Sell rating on C3ai (AI – Research Report), with a price target of $24.00.

Bradley Sills has given his Sell rating due to a combination of factors impacting C3.ai’s financial performance and market position. The company’s subscription revenue, which is a key indicator of demand, fell short of expectations by 12%, and its initial revenue guidance for FY26 was lower than previous estimates, indicating limited benefits from AI advancements. Additionally, the number of Initial Production Deployments decreased significantly from the previous quarter, raising concerns about the company’s ability to capitalize on generative AI trends.
Furthermore, while there was a sequential increase in Remaining Performance Obligations (RPO), it still showed a year-over-year decline, suggesting challenges with customer retention and conversion rates amidst a transition to a consumption-based model. Although there have been improvements in operating margins, with a target to break even by FY27, the current financial metrics, including a rule of 2% for growth and margin, do not present an attractive risk-reward scenario. Consequently, Sills maintains a cautious outlook, reiterating an Underperform rating and advising investors to consider other opportunities in the software sector.

In another report released today, KeyBanc also reiterated a Sell rating on the stock with a $18.00 price target.