C3.ai Gears Up to Post Q4 Earnings: Buy, Sell or Hold the Stock?

Core Viewpoint - C3.ai is set to report its fiscal Q4 2025 results, with expectations of strong revenue growth but continued operational losses due to strategic investments in sales and development [1][11]. Financial Performance - In the last reported quarter, C3.ai's revenue increased by 26% year-over-year to $98.8 million, with subscription revenue rising 22% to $85.7 million [2][3]. - The company signed 50 new pilot programs, bringing the total to 245, indicating a strong pipeline for future revenue conversion [2]. - The Zacks Consensus Estimate for fiscal Q4 revenue is $108.3 million, reflecting a 25% year-over-year growth [5]. Strategic Alliances - Partnerships with Microsoft Azure, Amazon AWS, and McKinsey QuantumBlack significantly boosted deal flow, with Microsoft-related agreements increasing by 460% quarter-over-quarter [3]. - The company anticipates that its growing sales pipeline, supported by these strategic alliances, will facilitate sequential top-line growth [10]. Earnings Estimates - The consensus estimate for the fiscal fourth-quarter bottom line is a loss of $0.20 per share, wider than the previous year's loss of $0.11 per share [5][7]. - For fiscal 2025, C3.ai is projected to achieve a revenue growth of 29.6% compared to 2024 [6]. Operational Insights - C3.ai expects a non-GAAP operating loss of $30 million to $40 million for the quarter, which is wider than the previous quarter's loss of $23.1 million [11]. - The company aims to achieve positive free cash flow in fiscal Q4, driven by disciplined cost management and operational efficiency improvements [12]. Share Price Performance - C3.ai's shares have declined by 4.8% over the past three months, trading at a 49.6% discount from its 52-week high of $45.08 [13]. - The stock is currently at a premium relative to its sector but at a discount to historical metrics, with a forward 12-month Price/Sales ratio of 6.24X compared to the sector's 6.07X [17]. Investment Considerations - Despite strong revenue growth, ongoing operational losses and limited earnings visibility raise concerns about the sustainability of revenue generation [19]. - The anticipated widening operating loss due to increased spending in sales and development suggests prolonged margin pressure [20].