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AI Shares Dip 27% YTD: Buy, Sell or Hold the Stock Post Q3 Earnings?
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C3.ai (AI - Free Report) shares have lost 26.8% in the year-to-date (YTD) period compared with the Zacks Computer & Technology sector’s decline of 0.9% and the Zacks Computers - IT Services industry’s decline of 1.4%. The underperformance can be attributed to macroeconomic uncertainties and stiff competition in the enterprise AI sector.
However, the company reported solid third-quarter fiscal 2025 results, with earnings and revenues beating the respective Zacks Consensus Estimate.
AI reported a third-quarter fiscal 2025 adjusted loss of 12 cents per share, narrower than the Zacks Consensus Estimate of a loss of 25 cents. The company reported a non-GAAP loss of 13 cents in the year-ago quarter.
The company reported $98.78 million in revenues, a 26% year-over-year increase and 0.83% above the Zacks Consensus Estimate, driven by strong demand for AI-driven enterprise solutions, with subscription revenues rising 22% year over year to $85.7 million, highlighting the growing enterprise adoption of its AI platform.
Year-to-Date Performance
Image Source: Zacks Investment Research
In the third quarter of fiscal 2025, C3.ai secured 66 agreements, including 50 pilot projects, representing a 72% year-over-year increase. This represents a notable increase in demand for its Enterprise AI and Generative AI offerings.
AI Benefits From Expanding Clientele
C3.ai 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. In the third quarter of fiscal 2025, AI finalized 47 agreements through its partner network, marking a 74% year-over-year increase.
Partnerships with major players like Microsoft (MSFT - Free Report) , Amazon’s (AMZN - Free Report) cloud computing platform AWS, and McKinsey QuantumBlack helped accelerate sales cycles, expand global reach, and deliver more impactful solutions to clients.
In the third quarter of fiscal 2025, C3.ai and Microsoft closed 28 agreements across nine industries, marking a 460% quarter-over-quarter increase. The joint qualified opportunity pipeline grew more than 244% year over year, with sales cycles shortening by nearly 20% sequentially.
In the same quarter, C3 AI and Amazon Web Services expanded its partnership to accelerate the adoption of advanced Enterprise AI solutions, emphasizing a strong go-to-market strategy through joint offerings, deeper cloud integration, and enhanced AI-driven capabilities for enterprises.
C3.ai’s AI applications became immediately purchasable on Microsoft Azure, AWS, and Alphabet’s (GOOGL - Free Report) cloud computing platform, Google Cloud, improving accessibility for enterprises. The company also collaborated closely with Google Cloud to enhance AI deployment for enterprise clients.
C3.ai Drives Growth With AI Pilots and Federal Wins
AI demonstrated strong momentum in its AI and federal business segments, achieving notable milestones across multiple industries and government entities.
In the third quarter of fiscal 2025, the company closed 20 C3 Generative AI pilots with Mars, Liberty Coca-Cola Beverages, the U.S. Department of Defense, and other organizations, including various government agencies in New Jersey, Montana, and California.
The company’s federal business saw strong growth in the third quarter of fiscal 2025, securing new and expanded agreements with the U.S. Department of Defense, the U.S. Air Force, the U.S. Navy, CAE USA, and the Missile Defense Agency.
AI Offers Solid Top-Line Growth Guidance
C3.ai’s strong adoption of C3 Generative AI solutions and increased demand for its Enterprise AI software has been noteworthy.
For fourth-quarter fiscal 2025, C3.ai expects revenues between $103.6 million and $113.6 million.
For fiscal 2025, C3.ai expects revenues between $383.9 million and $393.9 million.
Earnings Estimate Shows Mixed Trend
The Zacks Consensus Estimate for fourth-quarter fiscal 2025 revenues is currently pegged at $108.64 million, indicating growth of 25.46% from the figure reported in the year-ago quarter.
The consensus mark for loss is pegged at 26 cents per share, which remained unchanged over the past 30 days. The figure indicates a year-over-year decline of 136.36%.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $388.16 million, indicating 29.57% growth year over year.
The consensus mark for loss is pegged at 63 cents per share, which remained unchanged over the past 30 days. The figure indicates a year-over-year decline of 34.04%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
AI Trading at a Premium
We point out that C3.ai stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales, AI is trading at 7.36X, higher than the sector’s 6.32X.
Price/Sales (F12M)
Image Source: Zacks Investment Research
What Should Investors Do With AI Stock?
Despite strong demand for C3 Generative AI solutions and an expanding partner base, C3.ai is suffering from stiff competition in the enterprise AI sector. This intense competition clouds C3.ai’s efforts to gain a stronger foothold in the market.
As a result, C3.ai has made plans to invest aggressively in its offerings to secure market share. However, this strategy is expected to keep margins under pressure in the near term, making the stock risky for investors.
AI is also suffering from macroeconomic uncertainties, which are impacting its development, adoption, and integration across industries.
The company’s Growth Score of F makes the stock unattractive for growth-oriented investors.
Image: Bigstock
AI Shares Dip 27% YTD: Buy, Sell or Hold the Stock Post Q3 Earnings?
C3.ai (AI - Free Report) shares have lost 26.8% in the year-to-date (YTD) period compared with the Zacks Computer & Technology sector’s decline of 0.9% and the Zacks Computers - IT Services industry’s decline of 1.4%. The underperformance can be attributed to macroeconomic uncertainties and stiff competition in the enterprise AI sector.
However, the company reported solid third-quarter fiscal 2025 results, with earnings and revenues beating the respective Zacks Consensus Estimate.
AI reported a third-quarter fiscal 2025 adjusted loss of 12 cents per share, narrower than the Zacks Consensus Estimate of a loss of 25 cents. The company reported a non-GAAP loss of 13 cents in the year-ago quarter.
The company reported $98.78 million in revenues, a 26% year-over-year increase and 0.83% above the Zacks Consensus Estimate, driven by strong demand for AI-driven enterprise solutions, with subscription revenues rising 22% year over year to $85.7 million, highlighting the growing enterprise adoption of its AI platform.
Year-to-Date Performance
Image Source: Zacks Investment Research
In the third quarter of fiscal 2025, C3.ai secured 66 agreements, including 50 pilot projects, representing a 72% year-over-year increase. This represents a notable increase in demand for its Enterprise AI and Generative AI offerings.
AI Benefits From Expanding Clientele
C3.ai 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. In the third quarter of fiscal 2025, AI finalized 47 agreements through its partner network, marking a 74% year-over-year increase.
Partnerships with major players like Microsoft (MSFT - Free Report) , Amazon’s (AMZN - Free Report) cloud computing platform AWS, and McKinsey QuantumBlack helped accelerate sales cycles, expand global reach, and deliver more impactful solutions to clients.
In the third quarter of fiscal 2025, C3.ai and Microsoft closed 28 agreements across nine industries, marking a 460% quarter-over-quarter increase. The joint qualified opportunity pipeline grew more than 244% year over year, with sales cycles shortening by nearly 20% sequentially.
In the same quarter, C3 AI and Amazon Web Services expanded its partnership to accelerate the adoption of advanced Enterprise AI solutions, emphasizing a strong go-to-market strategy through joint offerings, deeper cloud integration, and enhanced AI-driven capabilities for enterprises.
C3.ai’s AI applications became immediately purchasable on Microsoft Azure, AWS, and Alphabet’s (GOOGL - Free Report) cloud computing platform, Google Cloud, improving accessibility for enterprises. The company also collaborated closely with Google Cloud to enhance AI deployment for enterprise clients.
C3.ai Drives Growth With AI Pilots and Federal Wins
AI demonstrated strong momentum in its AI and federal business segments, achieving notable milestones across multiple industries and government entities.
In the third quarter of fiscal 2025, the company closed 20 C3 Generative AI pilots with Mars, Liberty Coca-Cola Beverages, the U.S. Department of Defense, and other organizations, including various government agencies in New Jersey, Montana, and California.
The company’s federal business saw strong growth in the third quarter of fiscal 2025, securing new and expanded agreements with the U.S. Department of Defense, the U.S. Air Force, the U.S. Navy, CAE USA, and the Missile Defense Agency.
AI Offers Solid Top-Line Growth Guidance
C3.ai’s strong adoption of C3 Generative AI solutions and increased demand for its Enterprise AI software has been noteworthy.
For fourth-quarter fiscal 2025, C3.ai expects revenues between $103.6 million and $113.6 million.
For fiscal 2025, C3.ai expects revenues between $383.9 million and $393.9 million.
Earnings Estimate Shows Mixed Trend
The Zacks Consensus Estimate for fourth-quarter fiscal 2025 revenues is currently pegged at $108.64 million, indicating growth of 25.46% from the figure reported in the year-ago quarter.
The consensus mark for loss is pegged at 26 cents per share, which remained unchanged over the past 30 days. The figure indicates a year-over-year decline of 136.36%.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $388.16 million, indicating 29.57% growth year over year.
The consensus mark for loss is pegged at 63 cents per share, which remained unchanged over the past 30 days. The figure indicates a year-over-year decline of 34.04%.
C3.ai, Inc. Price and Consensus
C3.ai, Inc. price-consensus-chart | C3.ai, Inc. Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
AI Trading at a Premium
We point out that C3.ai stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales, AI is trading at 7.36X, higher than the sector’s 6.32X.
Price/Sales (F12M)
Image Source: Zacks Investment Research
What Should Investors Do With AI Stock?
Despite strong demand for C3 Generative AI solutions and an expanding partner base, C3.ai is suffering from stiff competition in the enterprise AI sector. This intense competition clouds C3.ai’s efforts to gain a stronger foothold in the market.
As a result, C3.ai has made plans to invest aggressively in its offerings to secure market share. However, this strategy is expected to keep margins under pressure in the near term, making the stock risky for investors.
AI is also suffering from macroeconomic uncertainties, which are impacting its development, adoption, and integration across industries.
The company’s Growth Score of F makes the stock unattractive for growth-oriented investors.
C3.ai currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.