C3.ai Analysts Underwhelmed By Q2 Results: 'Slow Adoption Of Generative AI'

Shares of C3.ai Inc AI tanked Thursday after the company reported a fiscal second-quarter revenue miss.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

JMP Securities On C3.ai

Analyst Patrick Walravens maintained a Market Outperform rating and $40 price target.

C3.ai announced “slightly disappointing” results for its fiscal second quarter, “reflecting slow adoption of generative AI and poor sales execution in EMEA,” Walravens wrote in a note.

Although the company reported revenues of $73.2 million, short of Street expectations of $74.3 million, it posted a non-GAAP loss of 13 cents per share, better than the consensus estimate of a loss of 18 cents per share, the analyst stated. Revenues grew by 17% year-on-year, “an improvement from 11% growth in F1Q24,” he added.

Morgan Stanley On C3.a

Analyst Sanjit Singh reiterated an Underweight rating and $20 price target.

C3.ai’s model transition “continues to weigh” on performance, while new deals “largely remain in pilot stages,” Singh said.

“The company is now beginning to lean more into investments again in order to grow engineering headcount and to invest in lead generation to secure continued momentum on the Generative AI opportunity,” the analyst wrote. “This led to another reset of operating income expectations following last quarter's push out of profitability targets,” he added.

Check out other analyst stock ratings.

KeyBanc Capital Markets On C3.ai

Analyst Michael Turits reaffirmed a Sector Weight rating on the stock.

C3.ai missed revenue expectations due to “headwinds from lengthening decision cycles as organizations pause to assess AI governance strategies, and mis-execution in Europe,” Turits wrote in a note.

While the company maintained its full-year revenue guidance, it lowered EBIT margins to negative 41% at the midpoint, from negative 28% previously, “to invest in lead-gen, engineering talent, and version upgrades for customers - largely aimed at capturing the GenAI opportunity,” the analyst stated.

Needham On C3.ai

Analyst Mike Cikos maintained a Hold rating on the stock.

C3.ai's subscription revenues accelerated again from 8% in the previous quarter to 12% year-on-year, Cikos said. “Furthermore, Subscription Revenue beat the consensus, adding $5.1 million dollars sequentially,” he added.

“Management spoke to multiple positive leading indicators including accelerating growth in Customer Engagements and Consumption Pilots,” the analyst further stated.

AI Price Action: Shares of C3.ai lost 10.77% Thursday, closing at $26.02.

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