Why C3.ai ($AI) Stock Is Struggling Despite Earnings Beat

5 wrz

C3.ai (NYSE: AI) is facing a challenging day on the stock market after reporting its fiscal first-quarter earnings, even though it exceeded top- and bottom-line estimates. The company’s stock has plunged over 14% in Thursday’s session, reflecting investor concerns despite a strong earnings report.

Overview
C3.ai reported revenue of $87.2 million for the quarter ending July 31, representing a 20.5% increase year-over-year. This growth was driven by a 20% rise in subscription revenue, which reached $73.5 million. The company also narrowed its net loss per share to 5 cents, improving from 9 cents in the previous year. Both figures beat Wall Street’s expectations, which had forecasted revenue of $86.9 million and a net loss of 13 cents per share.

Despite these positive results, the company’s subscription revenue fell short of the anticipated $79.2 million, contributing to the stock's decline. CEO Thomas Siebel highlighted a “solid start” to the fiscal year, with C3.ai seeing continued demand for its enterprise AI solutions. However, the lower-than-expected subscription revenue overshadowed the overall positive earnings report.

Looking ahead, C3.ai provided a revenue forecast for Q2 of fiscal 2025 between $88.6 million and $93.6 million, aligning with analyst expectations. The full-year revenue guidance remains unchanged at $370 million to $395 million. However, the company also projected a larger-than-expected loss for the current quarter, further unsettling investors.

Technical Outlook
Technically, C3.ai’s stock is showing signs of strain. The shares, which had gained nearly 30% earlier this year, are now down roughly 30% since December 31. The latest price action indicates that the stock may be forming a bearish flag pattern, following a long uptrend. This pattern suggests that the current downtrend could extend further if bearish sentiment persists.

The stock’s recent drop has pushed it to its lowest levels in months, and several Wall Street analysts have revised their price targets downward. The consensus recommendation is now a "Hold," reflecting the mixed sentiment surrounding C3.ai’s performance and outlook.

Conclusion
C3.ai’s earnings report presented a mixed bag of results. While the company beat earnings estimates and continued to show growth in revenue, the underwhelming subscription revenue and higher-than-expected losses for the upcoming quarter have weighed heavily on its stock. As the company transitions to a consumption model, historically a challenging phase, investors remain cautious. The technical indicators also suggest that the stock may face further declines if the bearish trend continues. For now, investors are advised to stay alert to both fundamental updates and technical signals as C3.ai (NYSE: AI) navigates this turbulent period.