C3.ai Before Q1 Earnings Release: Buy, Sell or Hold the Stock?

Core Viewpoint - C3.ai is facing significant challenges in its first quarter of fiscal 2026, with a projected revenue decline and widening losses, despite having strong partnerships and a solid cash position [10][20]. Financial Performance - In the last reported quarter, C3.ai's revenue increased by 26% year over year to $108.7 million, with subscription revenue rising 9% to $87.3 million [2] - The company reported a gross margin of 69% and narrowed its operating loss to $31.2 million, while free cash flow turned positive at $10.3 million, supported by $742.7 million in cash [2] - For the upcoming fiscal first quarter, revenue is expected to be between $70.2 million and $70.4 million, reflecting a 19% year-over-year decline [10] - The Zacks Consensus Estimate for the fiscal first-quarter bottom line has widened to a loss of 38 cents per share, compared to a loss of 5 cents per share a year ago [6] Partnerships and Market Position - C3.ai's alliance with Microsoft resulted in 28 new deals and access to over 600 joint accounts, significantly enhancing its market reach [3] - The company has expanded its partnerships with Amazon AWS and Google Cloud, as well as new collaborations with PwC and McKinsey QuantumBlack, which have driven over 70% of annual agreements [3] - The partner-driven strategy has shown promise, with 73% of Q4 deals involving channel partners, leading to a 400% increase in bookings through these channels [8][13] Growth and Diversification - C3.ai has diversified its growth beyond oil and gas, with non-oil and gas verticals growing by 48% in fiscal 2025 [12] - New clients such as U.S. Steel, Rolls Royce, and Bristol-Myers Squibb have contributed to a more balanced revenue base, reducing dependence on legacy energy contracts [12] Liquidity and Future Outlook - The company maintains a strong liquidity position, with cash and equivalents at $711.9 million, providing flexibility for continued investment in product development and market strategies [15] - Despite the anticipated widening losses, C3.ai aims for non-GAAP profitability by fiscal 2027 [15] Stock Performance - C3.ai's shares have decreased by 34.1% over the past three months, underperforming its sector [18] - The stock is currently trading at a 62.5% discount from its 52-week high of $45.08 and a 15% premium to its 52-week low of $14.70 [18]