C3.ai Hits 'Bump In The Road': 5 Analysts Weigh Strong AI Demand Against Margin Pressures, Subscription Weakness

Although C3.Ai Inc AI shares are falling following the company’s first-quarter financial results, analysts largely remain positive on the longer-term story, fueled by a continued rise in AI-related demand.

• Wedbush analyst Dan Ives maintained C3.ai with an Outperform rating Thursday morning and lowered the price target from $40 to $30.
• Oppenheimer analyst Timothy Horan maintained an Outperform rating on the stock following earnings.
• KeyBanc analyst Eric Heath believes the stock is fairly valued at around $19 per share.
• Piper Sandler analyst Arvind Ramnani maintained a Neutral rating on C3.ai and lowered the price target from $29 to $24
• DA Davidson analyst Gil Luria maintains a Neutral rating and slashed the price target from $30 to $20.

See Also: Nvidia Takes A Page From Apple’s Playbook: Jensen Huang Wants AI Stalwart To Go Beyond Chips And Be One-Stop Shop For Data Center Clients

Wedbush: In a new note to clients, Ives explained that the company’s better-than-expected revenue and earnings numbers are being overlooked due to a change in how software and services revenue is reported, which is going to impact subscription and services growth moving forward.

Looking ahead, C3.ai expects to generate negative free cash flow in the coming quarters, but anticipates positive free cash flow for the full year as it focuses on cash management, the Wedbush analyst said.

“While this was a slight bump in the road, we remain positive on C3.ai going into 2025 with a strong pipeline across industries coupled with solid top-line growth while seeing solid bottom-line expansion as the AI Revolution gains more momentum over the next few years,” Ives said.

Oppenheimer: Similar to Wedbush, Horan noted that quarterly results are likely to remain volatile, but he believes the “very strong demand” the company is seeing will help carry shares higher.

The Oppenheimer analyst anticipates 30% revenue growth this year and close to 40% revenue growth by the end of next year, citing the company’s unique AI applications and skills, paired with minimal competition.

KeyBanc: Heath further highlighted the AI story driving C3.ai, but raised concerns about the company’s ability to broaden its offerings.

“While we believe C3 AI may see increased demand for its AI/ML services given the high priority of generative AI in the enterprise, we have concerns about the Company’s ability to broaden beyond vertical-specific AI applications and any technological differentiation in horizontal adjacencies, as well as on low model visibility given the shift to a consumption revenue model,” Heath said.

The KeyBanc analyst highlighted the company’s weak subscription revenues, but noted that services revenue meaningfully beat expectations. Heath doesn’t have a price objective for C3.ai. Following the print, he maintained his full-year 2025 estimates, but lowered revenue expectations for 2026.

Piper Sandler: Ramnani expects margins to face continued pressure as the company focuses on growth.

C3.ai’s first-quarter results were driven by broad-based growth and a focus on expense management, but subscription revenues came in light, Ramnani said.

The analyst noted that interest in C3.ai’s products continues to trend well given that the company closed 71 agreements in the quarter. However, he expects margins to face pressure as the company continues to lean into growing pilots.

DA Davidson On AI: Luria came away with many of the same takeaways as the aforementioned analysts. He highlighted continued demand, but noted that the selloff is likely due to weaker-than-expected subscription revenues.

After updating estimates to reflect guidance from management, Luria determined that shares fully reflect current growth prospects for the company.

“C3.ai continues to convey a large opportunity ahead of it and is focused on growing total revenue,” the DA Davidson analyst said.

AI Price Action: C3.ai shares fell more than 20% after reporting earnings after the close on Wednesday. The stock is bouncing back a bit Thursday morning and was last down 12.3% at $20.18, per Benzinga Pro.

Read Next:

• ‘Tofu-Like’ Psychedelic Gets FDA Nod – Mindstate’s AI-Designed Therapy To Begin Human Trials

Photo: Shutterstock.