Why C3.ai stock was cut today

Actions of C3. have (AI -12.75%)the software-as-a-service company that provides artificial intelligence (AI) to the enterprise, sank today after the company provided disappointing guidance in its fiscal first-quarter earnings report. As a result, the stock was down 11% on the news as of 10:06 a.m. ET.

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C3.ai is still struggling

C3.ai stock caught fire in the early stages of the generative AI boom. However, it has cooled since then as its results have not matched the explosive growth one would expect from an AI company in this era.

In the first quarter, the company reported revenue up 21% to $87.2 million, beating estimates of $86.9 million. The company also built momentum in its client base as it closed 71 deals in the quarter, up 122% from last year, and reported its sixth consecutive quarter of revenue acceleration.

However, the business is still far from turning a profit as its generally accepted accounting principles (GAAP) operating loss improved modestly from $74.1 million to $72.6 million. Thanks to a stock-based compensation expense of $54.7 million, it ended with an adjusted loss per share of $0.05, an improvement from a loss of $0.09 and better than consensus at a loss per share of $0.13.

CEO Thomas Siebel called the quarter a “solid start to the fiscal year” and said the company had “what we believe are the highest levels of customer satisfaction in the industry.”

What’s next for C3.ai

Looking to the second quarter, the company expects revenue of $88.6 million to $93.6 million, up 24.4% at midpoint and in line with consensus. Adjusted operating loss is also expected to widen from $25 million to $26.7 million – $34.7 million, showing that profitability will remain elusive.

While the earnings report has been mostly in line with the company’s results so far, investors seem to be getting impatient with the lack of profits and stock dilution, even as revenue growth continues to improve.

At this point, the deal still seems unproven.