C3.ai Shares Continue to Plunge After Terrible Earnings Report

Shares of C3.ai (NYSE: AI) fell 11.1% in the Thursday premarket after the enterprise AI service provider unveiled a disappointing quarterly report. Although the AI frenzy continues, the firm posted weaker-than-expected revenue growth in the fiscal Q2 2024 and missed estimates for the Q3 outlook. 

C3.ai Misses Revenue Estimates, Offers Weak Guidance

C3.ai, one of the stocks that thrived during the 2023 AI boom, is set for another sharp stock price drop on Thursday.

Notably, the company’s shares fell over 11% in the premarket trading after the enterprise AI startup reported financial results for the fiscal Q2 2024 that missed Wall Street’s expectations. The stock closed at $29.16 on Wednesday, down 3% on the day.

In particular, the firm posted second-quarter revenue of $73.23 million, missing the consensus projection of $74.33 million, although it was up 17.3% year-over-year. Loss per share (EPS) in the quarter stood at $0.13, narrower than the estimated loss per share of $0.18.

Further, C3.ai’s gross margin was reported at 56.1%, down significantly from 66.7% in the same period last year. The company reported a negative cash flow of -$55.13 million, compared to -$8.9 million in the quarter prior. 

Looking ahead, the midpoint of the startup’s Q3 revenue guidance sits at $76 million, also below the analysts’ expectations of $77.68 million. For the full fiscal year, C3.ai reiterated its revenue outlook of $307.5 million at the midpoint.

Commenting on its report, Gene Munster, managing partner at Deepwater Asset Management, said C3.ai is not a transformative AI company. 

“We want to invest in the companies that are essentially the building blocks” in the AI space, Munster said, but the investment firm did not include C3.ai in its Deepwater Frontier Tech ETF. 

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C3.ai Up 160% YTD, But Wall Street Not As Bullish Anymore

C3.ai is a cloud-based AI Software-as-a-Service (SaaS) enterprise company. It develops a set of proprietary applications known as the C3 AI Suite, which has a primary goal of helping large to medium-sized organizations to implement complex use cases across the organization.

As the latest AI revolution led by OpenAI and Microsoft took the tech space by storm in 2023, C3.ai was among the companies that drew investors’ attention. Despite its recent pullback, its shares are still up more than 160% since the start of the year. However, Wall Street’s consensus estimates on the stock are not as bullish anymore, with the average 12-month price target sitting at $27.08, implying a potential downside of more than 7%. 

Since reaching its peak price in June, C3.ai embarked on a downward trajectory. Do you think the startup has the potential to get back to winning ways? Let us know in the comments below.