Why are C3.AI Shares Plunging in Premarket Trading?

C3.ai Inc. (NYSE: AI) shares are facing significant pressure in premarket trading, dropping 12.52% to $14.60 as of early morning EDT on September 4, 2025. The enterprise AI software company has been hit with a perfect storm of negative developments, including a securities class action lawsuit, disappointing Q1 2026 earnings results that fell far short of expectations, and ongoing concerns about leadership transitions. The stock has already declined over 50% year-to-date, making it one of the worst performers in the AI sector despite the broader artificial intelligence boom.

C3.ai Hit with a Securities Class Action Lawsuit

C3.ai has been hit with a securities fraud class action lawsuit filed in the Northern District of California, covering investors who purchased shares between February 26, 2025 and August 8, 2025. The lawsuit, styled Liggett Sr. v. C3.ai, Inc., et al., alleges that the company made false and misleading statements about CEO Thomas Siebel’s health and its impact on business operations. Specifically, the complaint focuses on Siebel’s February 26 earnings call assurance that his “health is excellent” and that he was “fully engaged, managing every detail of the business every day.”

The legal action gained momentum after C3.ai’s shocking preliminary Q1 2026 results revealed revenues of only $70.2-$70.4 million, dramatically below the $100-109 million guidance provided in May. Siebel later admitted that “health issues prevented me from participating in the sales process as actively as I have in the past” and acknowledged that his reduced participation had a greater impact than previously thought. Hagens Berman, the law firm leading the case, is investigating whether C3.ai misled investors about the extent to which Siebel’s health issues were affecting the company’s financial performance and deal-closing capabilities.

The lawsuit represents a significant reputational and financial risk for C3.ai, particularly given the company’s dependence on high-touch sales processes and Siebel’s historically central role in customer relationships. With a lead plaintiff deadline of October 21, 2025, the case could create additional uncertainty for investors already concerned about the company’s growth trajectory and leadership stability.

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Disappointing Q1 2026 Earnings and C3.ai Leadership Transition

C3.ai’s Q1 2026 financial results, announced on September 3, 2025, painted a troubling picture of the company’s current state. Total revenue came in at $70.3 million, representing a significant decline from $87.2 million in the same quarter last year and falling well short of management’s previous guidance range of $100-109 million. The company reported a GAAP net loss of $116.8 million, or $0.86 per share, compared to a loss of $62.8 million, or $0.50 per share, in the prior year period. Subscription revenue, which forms the core of C3.ai’s business model, declined to $60.3 million from $73.5 million year-over-year.

Siebel characterized the financial performance as “completely unacceptable” and attributed the poor results to two main factors: disruption from restructuring the sales and services organization with new leadership, and his own reduced participation in the sales process due to health issues. The company withdrew its full-year fiscal 2026 guidance, providing only second-quarter guidance of $72-80 million in revenue, signaling continued uncertainty about the business trajectory. Despite closing 46 agreements during the quarter, including 28 initial production deployments, the overall booking performance failed to meet expectations.

In response to these challenges, C3.ai announced the appointment of Stephen Ehikian as the new CEO, effective September 1, 2025, with Siebel transitioning to Executive Chairman. Ehikian, a seasoned technology leader who previously served as Acting Administrator of the U.S. General Services Administration and built companies like RelateIQ (acquired by Salesforce), brings extensive enterprise software and AI experience. However, investors remain skeptical about the company’s ability to return to growth, particularly given the competitive enterprise AI landscape and C3.ai’s history of execution challenges.

C3.ai Shares Plunge Over 12% in Premarket Trading

As of premarket trading on September 4, 2025, C3.ai shares were down 12.52% to $14.60, following the previous day’s close at $16.68. The stock has been under severe pressure throughout 2025, declining over 51% year-to-date compared to the S&P 500’s 9.63% gain. With a current market capitalization of approximately $2.29 billion, the company is trading at a price-to-sales ratio of 5.74 times trailing twelve-month revenue, reflecting investor concerns about growth prospects and profitability challenges.

The company’s financial position remains relatively solid with $711.9 million in cash, cash equivalents, and marketable securities, providing runway for operations and strategic investments. However, the company continues to burn cash, with free cash flow negative at $34.3 million in Q1. Analyst price targets range from a low of $13.00 to a high of $30.00, with most firms maintaining cautious stances given the execution risks and competitive pressures in the enterprise AI market.

Looking ahead, C3.ai faces significant challenges in rebuilding investor confidence and returning to profitable growth. The new CEO will need to stabilize the sales organization, improve deal execution, and demonstrate that the company can capitalize on the massive enterprise AI opportunity without the same level of dependence on founder involvement.

With the securities lawsuit adding another layer of complexity and the competitive landscape intensifying with major tech companies investing heavily in AI, C3.ai’s ability to regain momentum will be closely watched by investors and industry observers alike.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.