C3.ai: Revenues increase by 21%

C3. have (AI -8.21%)an artificial intelligence (AI) software provider, published its earnings for the first quarter of fiscal 2025 on 2024-09-04.

The company reported total revenue of $87.2 million, which was in line with management’s guidance range of $84.0 million to $89.0 million and represented a 21% increase from $72.4 million in the same quarter last year. This growth was driven by a 20% year-over-year increase in subscription revenue, which reached $73.5 million.

Overall, the quarter demonstrated solid performance in key financial and operational areas.

Source: SEC documents. Expectations based on management guidance as provided in the 2024-05-29 earnings report.

Business overview

C3.ai focuses on providing enterprise artificial intelligence software applications through its comprehensive C3 AI platform. The platform streamlines the development and deployment of AI applications, with the goal of generating significant business value for its customers. C3.ai’s business strategies are based on several key success factors, including its model-driven architecture, industry-specific SaaS (Software as a Service) applications, generative AI capabilities, strategic partnerships and its recent transition to a pricing model based on consumption.

Recently, C3.ai has focused on expanding its footprint through partnerships with major cloud service providers such as Google Cloud, Amazon Web Services (AWS) and Microsoft Azure. The company has also increased investment in generative artificial intelligence capabilities to meet growing market demand for natural language processing and data analytics technologies.

Quarterly achievements and developments

During Q1 FY2025, C3.ai completed 71 deals, marking 122% year-over-year growth, including 52 pilots, up 117%. Notable new agreements were concluded with companies such as GSK, Electrobras, Valeroand several US federal agencies such as the Department of Defense. Federal bookings accounted for more than 30% of total bookings in the first quarter, highlighting significant traction in the sector.

There have been successful implementations of C3.ai applications in various industries. For example, Eletrobras used C3 AI applications to improve network resilience, while Nope used C3 AI Supply Chain Suite to improve manufacturing results. In addition, Riverside County, California has seen marked improvements in property valuation, with over 90% accuracy in their models.

Financially, C3.ai reported GAAP gross profit of $52.2 million, up from $40.5 million in the prior year, with a GAAP gross margin of 60%, an improvement from 56% last year. On a non-GAAP basis, gross profit was $60.9 million with a gross margin of 70%. The company achieved positive free cash flow of $7.1 million, compared to negative free cash flow of $(8.9) in the prior year.

C3.ai continued to advance its generative AI initiatives. The company saw strong demand for its C3 Generative AI product, closing 17 new pilots in Q1 and turning several of those pilots into production deployments, such as those with Carpenter technology and the US Marine Corps. These pilots span industries from manufacturing to federal agencies, showcasing the versatility and breadth of applications of C3.ai’s generative AI technology.

The company also reported GAAP net loss per share of ($0.50), an improvement from ($0.56) in the prior year. On a non-GAAP basis, net loss per share was ($0.05), a significant reduction from ($0.09) in the prior year. With cash reserves of USD 762.5 million, C3.ai maintains a strong liquidity position.

Looking ahead

For Q2 FY2025, C3.ai provided revenue guidance in the range of $88.6 million to $93.6 million. The company also reaffirmed its full fiscal 2025 revenue guidance of $370 million to $395 million, indicating solid growth expectations. Management anticipates a non-GAAP (generally accepted accounting principles) operating loss of $(26.7) to $(34.7) million for Q2 and $(95) million to $(125) million for the full fiscal year.

One area to watch is the company’s transition to a consumption-based pricing model, which may continue to impact gross margins in the near term due to the larger mix of pilot projects. However, this model is expected to drive long-term customer adoption and recurring revenue growth. In addition, the competitive landscape and economic conditions remain challenging factors that could impact AI enterprise budget allocations.

Investors should closely monitor C3.ai’s progress in expanding its generative AI capabilities and its traction in the federal sector. With continued strong demand and strategic advancements, C3.ai aims to further establish itself as the leader in the enterprise AI market.