C3.ai Stock Tumbles Amid AI Sector Growth

Investors holding shares of C3.ai (AI -10.45%) faced a tough week as the company's stock saw a substantial decline, dropping by nearly 18.7% as per data from S&P Global Market Intelligence. By the afternoon of Thursday, shares were still down by 15.6%, marking a sharp downturn for the AI company.

While the hype around artificial intelligence (AI) has lifted many companies in the sector, C3.ai's recent financial report, released after Wednesday’s market close, was less than stellar, causing its stock to spiral downward.

Financial Struggles

C3.ai's second fiscal quarter of 2024, ending on October 31, saw a revenue increase to $73.2 million, reflecting a 17% growth year over year. Yet, this was shadowed by a fall in gross profit margin to 56%, a significant drop from the 67% reported in the same quarter of the previous year. Costs escalated more rapidly than revenues, leading to an operating loss and a net loss of $69.6 million, which was a slight increase from a $68.9 million loss.

The company recorded an adjusted (non-GAAP) loss per share of $0.13, which was somewhat better than analysts' expectation of a $0.18 loss per share.

The Future Outlook

Another concern for investors is C3.ai's conservative forecast. The company's guidance for the third-quarter revenue hovers around $76 million at the midpoint, indicating a growth rate of 14% year over year, which would be a slowdown from its current pace. Even at the high end of the guidance, the growth rate maxes at around 17%.

While peers in the industry capitalize on the rapidly growing AI market, C3.ai seems to be lagging. The company has shifted its pricing approach from subscription-based to consumption-based last year, a change that was heavily promoted in its earnings announcement. However, despite this strategic move, significant results have not yet materialized.

The lackluster performance during an AI upsurge suggests that competitors might offer more promising prospects than C3.ai in the bustling AI market.

C3.ai, Stock, AI