Piper Sandler adjusted its outlook on c3.ai (NYSE:AI), a leading enterprise AI software provider, by reducing the price target to $24 from the previous $29, while holding a Neutral stance on the stock. The revision follows c3.ai's first-quarter earnings report, which presented a mixed financial picture. The company's total revenues aligned with market projections, but subscription revenue fell short, marking a sequential decrease despite year-over-year growth.
C3.ai (NYSE:AI)'s quarterly performance was highlighted by its ability to meet overall revenue expectations and deliver better-than-anticipated margins and earnings per share (EPS). This was attributed to widespread growth across its operations and diligent expense management. The company's adjusted operating margin surpassed forecasts, with a notable $9.5 million beat. Nevertheless, c3.ai has chosen to reaffirm its financial targets for fiscal year 2025, both for margins and top-line revenue.
Despite achieving its total revenue goals for the quarter, c3.ai's subscription revenue of $73.5 million did not meet the anticipated $79.2 million, representing an 8.1% sequential decline but a 19.7% increase year-over-year. On the positive side, the company's engagement with customers remains strong, as evidenced by the closing of 71 agreements during the quarter, which includes 52 pilot programs, marking a significant 117% increase from the previous year.
Additionally, the firm saw a robust 94% year-over-year growth in partner-supported bookings.
Piper Sandler noted that while these developments are encouraging, they expect margins to remain under pressure due to c3.ai's strategic emphasis on expanding pilot programs.
This focus on growth initiatives is likely to continue influencing the company's financial performance in the near term. The revised price target reflects these considerations, as Piper Sandler maintains its Neutral rating on the c3.ai shares.
AI software provider c3.ai has demonstrated significant financial growth in the first quarter of fiscal year 2025, with a 21% increase in year-over-year revenue. This robust increase was driven by a total revenue of $87.2 million, with subscription revenue contributing a noteworthy 84% of this total. Despite this success, Canaccord Genuity has adjusted c3.ai's price target from $30 to $23, while maintaining a hold rating.
Similarly, BofA Securities has reduced its price target from $24 to $20, upholding an underperform rating.
These adjustments follow the company's recent announcement of 71 new agreements and 52 pilot programs, primarily due to strong partner contributions and new deals with state and local organizations. However, BofA Securities suggests that the current momentum in artificial intelligence adoption has not significantly benefited the company.
Canaccord Genuity anticipates that while c3.ai's revenue might continue to grow at approximately a 20% rate, the number of new customer agreements is expected to decrease in the upcoming quarters.
InvestingPro Insights
In light of the recent financial analysis of c3.ai by Piper Sandler, additional insights from InvestingPro provide a deeper understanding of the company's market position and future prospects. With a market capitalization of approximately $2.92 billion, c3.ai holds more cash than debt on its balance sheet, indicating a strong liquidity position that could support its strategic growth initiatives. This is further supported by the fact that liquid assets exceed short-term obligations, providing the company with financial flexibility in the near term.
Although c3.ai's stock price has experienced significant volatility, with a 24.71% decline over the last three months, this may present an opportunity for investors looking for entry points in a company that is still growing its revenue, as indicated by the 16.41% revenue growth in the last twelve months as of Q4 2024. Additionally, 6 analysts have revised their earnings upwards for the upcoming period, suggesting a potential positive shift in the company's earnings trajectory. For investors interested in further analysis and additional InvestingPro Tips, there are more insights available at https://www.investing.com/pro/AI.
Despite the challenges, c3.ai's focus on expanding pilot programs and partner-supported bookings indicates an aggressive approach to capturing market share, which may lead to long-term benefits. The company's strategic moves and financial health can be tracked in real-time with InvestingPro, which offers an extensive list of additional tips to help investors make informed decisions.
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