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C3.ai Attains AWS Gen AI Competency: Is AI Stock Worth Buying?
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C3.ai (AI - Free Report) has been one of the prominent AI stocks in recent times thanks to strong demand for C3 Generative AI solutions and an expanding partner base that includes the three big cloud providers Amazon (AMZN - Free Report) , Alphabet (GOOGL - Free Report) and Microsoft (MSFT - Free Report) .
AI has been taking initiatives to expand its relationship with these cloud partners. It has now achieved AWS Generative AI competency, further deepening its relationship with Amazon.
The Amazon Web Services (“AWS”) Competency Program helps customers by connecting them with AWS Partners like C3.ai, which possesses extensive knowledge and technical expertise in using AWS technologies and best practices to adopt generative AI (Gen AI).
C3.ai recently announced the launch of C3 Generative AI for Government Programs, an advanced AI application that runs on Alphabet’s Google Cloud. The application is designed to help federal, state and local governments efficiently deliver accurate information to the public about various government programs.
The latest solution is expected to strengthen AI’s footprint in the federal space. In fiscal 2024, Federal revenues doubled year over year in fiscal 2024. AI closed 65 Federal agreements, up 48% year over year.
Expanding relationships with these cloud providers bode well for C3.ai’s long-term prospects. In fiscal 2024, AI closed 115 agreements through its partner network, up 62% year over year, which includes 91 agreements with AWS, Google Cloud and Microsoft Azure.
AI Stock Underperforms Industry YTD
AI shares have returned 28.1% in the past three months, driven by these factors. However, on a year-to-date basis, C3.ai shares have declined 1.2%, underperforming the Zacks IT Services industry’s return of 5% and the broader Zacks Computer and Technology sector’s gain of 23.8%.
YTD Performance
Image Source: Zacks Investment Research
Near-term prospects are not bright for AI, given the higher amount of investments required to drive growth. Moreover, the Value Style Score of F suggests a stretched valuation at this moment.
AI stock is trading at a premium with a forward 12-month Price/Sales of 8.76X compared with the Zacks IT Services industry’s 7.27X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
Higher Investments to Hurt AI Stock’s Near-Term Prospects
AI continues to expect near-term pressure on gross margin due to a higher mix of pilots, which are much costlier to acquire at the initial phase of the customer lifecycle.
Additional investments in sales force, research and development and marketing spending are expected to hurt operating margin.
The ongoing transition to a pay-as-you-go consumption model is resulting in smaller transactions of shorter terms, which will likely hurt revenue performance obligations despite an increase in revenues.
2024 Estimate Revisions Showing Downward Trend
For fiscal 2025, AI expects revenues between $370 million and $395 million. Non-GAAP loss from operations is expected between $95 million and $125 million.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $384.09 million, indicating 28.21% growth year over year. The consensus mark for loss is pegged at 54 cents per share, which has widened 14 cents over the past 30 days.
Estimate Revision
Image Source: Zacks Investment Research
C3.ai expects first-quarter fiscal 2025 revenues between $84 million and $89 million. Non-GAAP loss from operations is expected between $22 million and $30 million. The Zacks Consensus Estimate for first-quarter 2025 revenues is currently pegged at $87.12 million, indicating growth of 42% over the figure reported in the year-ago quarter.
C3.ai’s Long-Term Prospects Ride on Strong Portfolio
C3.ai’s expanding clientele and growing adoption of its Enterprise AI software are notable developments for investors.
C3 Generative AI is currently being used by manufacturing, industrial and military industries. It improves safety standards on production floors and equipment operations and analyzes technical information, contracts and financial data.
The strong portfolio is helping in the growing usage of AI solutions. Cargill has expanded from 13 to 18 plants in production in the past year. Baker Hughes sourcing optimization is currently deployed across 855 sites with 2000 users, saving roughly $100 million a year. Moreover, C3 AI reliability is currently deployed at 12 plants at Petronas, monitoring 4,000 control valves and realizing $25 million a year of annual loss avoidance.
C3.ai’s AI-powered predictive maintenance solutions were selected by the likes of Dow, Holcim and Con Edison (one of the largest energy companies) in the fiscal fourth quarter.
Conclusion
C3.ai’s plan to invest aggressively to gain market share is expected to keep margins under pressure in the near term. Despite strong demand for C3 Generative AI solutions and an expanding partner base, this factor is expected to drag down the AI stock in the near term.
C3.ai currently has a Zacks Rank #4 (Sell), which indicates that investors should stay away in the near term.
Image: Bigstock
C3.ai Attains AWS Gen AI Competency: Is AI Stock Worth Buying?
C3.ai (AI - Free Report) has been one of the prominent AI stocks in recent times thanks to strong demand for C3 Generative AI solutions and an expanding partner base that includes the three big cloud providers Amazon (AMZN - Free Report) , Alphabet (GOOGL - Free Report) and Microsoft (MSFT - Free Report) .
AI has been taking initiatives to expand its relationship with these cloud partners. It has now achieved AWS Generative AI competency, further deepening its relationship with Amazon.
The Amazon Web Services (“AWS”) Competency Program helps customers by connecting them with AWS Partners like C3.ai, which possesses extensive knowledge and technical expertise in using AWS technologies and best practices to adopt generative AI (Gen AI).
C3.ai recently announced the launch of C3 Generative AI for Government Programs, an advanced AI application that runs on Alphabet’s Google Cloud. The application is designed to help federal, state and local governments efficiently deliver accurate information to the public about various government programs.
The latest solution is expected to strengthen AI’s footprint in the federal space. In fiscal 2024, Federal revenues doubled year over year in fiscal 2024. AI closed 65 Federal agreements, up 48% year over year.
C3.ai, Inc. Price and Consensus
C3.ai, Inc. price-consensus-chart | C3.ai, Inc. Quote
Expanding relationships with these cloud providers bode well for C3.ai’s long-term prospects. In fiscal 2024, AI closed 115 agreements through its partner network, up 62% year over year, which includes 91 agreements with AWS, Google Cloud and Microsoft Azure.
AI Stock Underperforms Industry YTD
AI shares have returned 28.1% in the past three months, driven by these factors. However, on a year-to-date basis, C3.ai shares have declined 1.2%, underperforming the Zacks IT Services industry’s return of 5% and the broader Zacks Computer and Technology sector’s gain of 23.8%.
YTD Performance
Near-term prospects are not bright for AI, given the higher amount of investments required to drive growth. Moreover, the Value Style Score of F suggests a stretched valuation at this moment.
AI stock is trading at a premium with a forward 12-month Price/Sales of 8.76X compared with the Zacks IT Services industry’s 7.27X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
Higher Investments to Hurt AI Stock’s Near-Term Prospects
AI continues to expect near-term pressure on gross margin due to a higher mix of pilots, which are much costlier to acquire at the initial phase of the customer lifecycle.
Additional investments in sales force, research and development and marketing spending are expected to hurt operating margin.
The ongoing transition to a pay-as-you-go consumption model is resulting in smaller transactions of shorter terms, which will likely hurt revenue performance obligations despite an increase in revenues.
2024 Estimate Revisions Showing Downward Trend
For fiscal 2025, AI expects revenues between $370 million and $395 million. Non-GAAP loss from operations is expected between $95 million and $125 million.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $384.09 million, indicating 28.21% growth year over year. The consensus mark for loss is pegged at 54 cents per share, which has widened 14 cents over the past 30 days.
Estimate Revision
C3.ai expects first-quarter fiscal 2025 revenues between $84 million and $89 million. Non-GAAP loss from operations is expected between $22 million and $30 million. The Zacks Consensus Estimate for first-quarter 2025 revenues is currently pegged at $87.12 million, indicating growth of 42% over the figure reported in the year-ago quarter.
C3.ai’s Long-Term Prospects Ride on Strong Portfolio
C3.ai’s expanding clientele and growing adoption of its Enterprise AI software are notable developments for investors.
C3 Generative AI is currently being used by manufacturing, industrial and military industries. It improves safety standards on production floors and equipment operations and analyzes technical information, contracts and financial data.
The strong portfolio is helping in the growing usage of AI solutions. Cargill has expanded from 13 to 18 plants in production in the past year. Baker Hughes sourcing optimization is currently deployed across 855 sites with 2000 users, saving roughly $100 million a year. Moreover, C3 AI reliability is currently deployed at 12 plants at Petronas, monitoring 4,000 control valves and realizing $25 million a year of annual loss avoidance.
C3.ai’s AI-powered predictive maintenance solutions were selected by the likes of Dow, Holcim and Con Edison (one of the largest energy companies) in the fiscal fourth quarter.
Conclusion
C3.ai’s plan to invest aggressively to gain market share is expected to keep margins under pressure in the near term. Despite strong demand for C3 Generative AI solutions and an expanding partner base, this factor is expected to drag down the AI stock in the near term.
C3.ai currently has a Zacks Rank #4 (Sell), which indicates that investors should stay away in the near term.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.