C3.ai
shares were down sharply Thursday morning after the AI software company posted solid results for its latest quarter, while forecasting a larger full-year loss than previously expected.
The company also withdrew a previous forecast that it would reach non-GAAP profitability by the end of fiscal 2024.
“After careful consideration with our leadership and our marketing partners, we have made the decision to invest in lead generation, branding, market awareness, and customer success related to our Generative AI solutions,” CEO Thomas Siebel said in a statement. “The market opportunity is immediate, and we intend to seize it. While we still expect to be cash positive in Q4 FY 24 and in FY 25, we will be investing in our Generative AI solutions and at this time do not expect to be non-GAAP profitable in Q4 FY 24.”
In an interview with Barron’s on Thursday, Siebel said “the company made the decision based on the size of the opportunity” to use some of its $800 million in cash to boost its spending on sales, marketing, advertising and data scientists to capture more market share in generative AI-based application software. He describes the strategy as “a land grab,” adding that it would be “crazy not to invest in this market…we’re doing it with our eyes open.”
Siebel says C3.ai has already closed 12 deals for gen AI-based applications, from companies like Koch Industries and Nucor, and that there are 147 “opportunities in the queue.” He says that the company can bring a customer up and running in 12 weeks for a flat fee of $250,000—training a large language model on customer data—and then charges a usage fee after that.
Siebel says C3.ai plans to boost spending by about $10 million to $20 million a quarter to support the new applications. But he does not see the company’s cash balance falling below $700 million. “We have a lot of quarters of cash,” he says.
In a separate announcement Wednesday, C3.ai unveiled a group of 28 domain-specific AI software suites, for areas like aerospace, financial services and healthcare—and it plans to boost spending to drive sales.
For its fiscal first quarter ended July 31, C3.ai (ticker: AI) posted revenue of $72.4 million, up 11% from the year-earlier quarter, toward the high end of the company’s guidance range of $70 million to $72.5 million, and slightly ahead of the Wall Street consensus forecast at $71.6 million.
On an adjusted basis, the company lost 9 cents a share, narrower than the Street consensus forecast for a loss of 17 cents. Under generally accepted accounting principles, the company lost 56 cents a share.
For the October quarter, C3.ai sees revenue of $72.5 million to $76.5 million, with a non-GAAP loss from operations of between $27 million and $40 million. Wall Street estimates call for revenue of $73.8 million and an operating loss of $26.6 million.
For the April 2024 fiscal year, C3.ai continues to see revenue between $295 million and $320 million, but it now sees a non-GAAP loss from operations of between $70 million and $100 million, compared with a previous forecast loss of $50 million to $75 million. The Wall Street consensus estimate had called for a loss of $64 million.
“It is difficult to describe the scale of the increasing interest that we are seeing globally in enterprise AI adoption,” Siebel said in a statement accompanying the earnings announcement. “We are experiencing strong traction with our enterprise AI applications and especially C3 Generative AI.”
C3.ai shares were down 11% in morning trading Thursday.
Write to Eric J. Savitz at [email protected]
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