C3 AI (NYSE: AI) has announced its second-quarter results for fiscal year 2024, underscoring a revenue increase and strategic shifts in its business model. The company reported a 17% year-over-year increase in total revenue, amounting to $73.2 million for the quarter ending October 31, 2023. This growth is attributed to a significant rise in customer engagements and a transition to a consumption-based pricing model. Despite a dip in EMEA revenue and a reported operating loss, C3 AI is doubling down on investments in generative AI and human capital to bolster future performance.
Key Takeaways
- Total revenue grew by 17% year-over-year to $73.2 million, with subscription revenue making up 91% of the total.
- North American revenue increased by 28%, while EMEA revenue saw an 11% decrease.
- The company signed new agreements with notable entities such as Nucor Corporation (NYSE:NUE) and the U.S. Navy.
- A transition to consumption-based pricing has begun to yield positive results, with increased customer growth.
- C3 AI maintains its full-year revenue guidance at $295 million to $320 million, despite a projected increase in non-GAAP loss from operations.
Company Outlook
C3 AI provided a positive outlook for the upcoming quarters, expecting Q3 revenue to be between $74 million and $78 million. The full-year revenue guidance remains unchanged at $295 million to $320 million. However, the company anticipates a non-GAAP loss from operations to increase, ranging from negative $115 million to negative $135 million for the fiscal year. This reflects the company's strategic decision to invest heavily in generative AI, data scientists, and lead generation.
Bearish Highlights
The company reported an operating loss of $25 million for the quarter and an increased non-GAAP loss from operations guidance for the full year. Additionally, EMEA revenue decreased by 11%, and the company is facing short-term pressure on cash flow and profitability due to their investments in generative AI and human capital upgrades.
Bullish Highlights
C3 AI's shift to a consumption-based pricing model has shown promising signs, with pilot conversion rates and customer engagement on the rise. The company's investments in generative AI are expected to be a significant driver of future growth, as evidenced by the launch of 29 generative AI products and a new no-code self-service application on the AWS marketplace.
Misses
While the company's revenue has increased, it did experience sales headwinds and longer decision cycles due to the implementation of AI governance functions. Additionally, the EMEA region underperformed with an 11% decrease in revenue.
QA Highlights
The earnings call included discussions on the company's largest federal use case, predictive maintenance for the United States Air Force, and the successful loading of data from 22 weapon systems into their PANDA system. CEO Tom Siebel also addressed the increase in accounts receivable, attributing it to the timing of invoicing, and reiterated confidence in the company's positioning within the AI industry.
In conclusion, C3 AI is navigating through a period of strategic investment and transition, with a focus on expanding its generative AI offerings and adapting its pricing model to drive customer growth and engagement. While facing some financial headwinds, the company's leadership remains optimistic about its long-term trajectory and its role in the evolving AI market landscape.
InvestingPro Insights
C3 AI's latest earnings report reflects a dynamic financial landscape for the company. According to InvestingPro data, the company holds a market capitalization of $3.08 billion USD, which gives a sense of its size within the industry. Despite the reported increase in revenue, C3 AI is trading at a negative P/E ratio of -11.29, indicating that it did not generate net income over the past year. This aligns with the InvestingPro Tip that the company has not been profitable over the last twelve months.
InvestingPro Tips also highlight that C3 AI holds more cash than debt on its balance sheet, which may provide some financial resilience despite the declining trend in earnings per share. This financial cushion could be crucial as the company continues to invest in generative AI and transitions to a consumption-based pricing model. However, it's worth noting that 12 analysts have revised their earnings expectations downwards for the upcoming period, suggesting that investors should brace for potential challenges ahead.
For readers looking to delve deeper into the financial health and future prospects of C3 AI, InvestingPro offers a range of additional tips. Currently, there are 13 more InvestingPro Tips available that can provide further insights into the company's performance and market position.
The InvestingPro subscription is now on a special Cyber Monday sale with discounts of up to 60%. Moreover, using the coupon code sfy23, readers can get an additional 10% off a 2-year InvestingPro+ subscription, offering comprehensive analysis and data for informed investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.