Why would short-term traders dump C3.ai (AI) stock while the company demonstrates progress toward important financial objectives? Frankly, the market can be over-reactive sometimes. Sure, C3.ai’s just-released quarterly report wasn’t perfect in every way, but there certainly are positive data points to consider. In the final analysis, I am bullish on AI stock because C3.ai is making headway toward profitability or at least breakeven.
C3.ai sells enterprise (i.e., business) artificial intelligence (AI) software. With the hype and hoopla of AI in 2022 and 2023 starting to fade a little bit, investors now want to see concrete evidence that AI businesses like C3.ai are actually viable and profitable.
Maybe they’re being too demanding and applying too much pressure to C3.ai right now. Just because C3.ai isn’t income-positive right now, this doesn’t mean the company isn’t making progress. Furthermore, it’s unreasonable for investors to demand perfection if C3.ai is generally exceeding Wall Street’s expectations. Therefore, there may be a prime buying opportunity now that the C3.ai stock price is down.
C3.ai Stock Crumbles despite Sales and Earnings Beats
It’s an unusual situation when a stock tumbles even though the company surpassed Wall Street’s top-line and bottom-line estimates. This actually happened with C3.ai on Thursday morning, with C3.ai stock crashing 15% even though the company posted sales and EPS beats. This reinforces my thesis that AI stock could be due for a rebound based on the market’s over-dramatic response to C3.ai’s quarterly financial report.
So, here’s the rundown for C3.ai’s first-quarter Fiscal Year 2025 results. First of all, the company generated revenue of $87.2 million, up 21% year over year. That result is nothing to sneeze at, and it beat the analysts’ consensus estimate of $86.9 million. This helps to answer the burning question of whether AI technology is just hype. Clearly, C3.ai’s sales growth shows that there’s actual demand for enterprise AI software and it’s not just a hype-fueled bubble (for this company, at least).
Second, C3.ai reported an adjusted (non-GAAP) earnings loss of $0.05 per share, which isn’t a massive per-share loss when the stock price is around $20. It would be much more alarming if the company lost $0.05 per share and the stock price was, say, $0.25 per share.
This bottom-line result also proves that C3.ai is making headway in this area. That’s because the company incurred an earnings loss of $0.09 per share in the prior year’s quarter. When you really think about it, C3.ai is getting pretty close to breakeven and might actually turn a per-share profit soon.
Additionally, C3.ai’s EPS result easily beat Wall Street’s consensus call for the company to lose $0.13 per share. This is a perfect example of how investors might want to forgive a company for being unprofitable today, as the bottom-line figures could be better in the coming quarters.
The Market Hyper-Focused on One Part of C3.ai’s Report
It’s a strange phenomenon to see the market disregard C3.ai’s aforementioned positive points and instead choose to focus heavily on one aspect of C3.ai’s quarterly report – subscription revenue. If investors over-reacted and irrationally dumped C3.ai stock just because of this one issue in the company’s report, then this could support my contention that AI stock deserves to be higher.
To be specific, C3.ai generated $73.5 million in Subscription revenue during Fiscal Year 2025’s first quarter. That’s up 20% year-over-year, which is good progress and shouldn’t disappoint investors.
Yet, Wall Street wanted to see C3.ai post $79.2 million in quarterly Subscription segment revenue. It seems that short-term traders may have obsessed over that “miss” and decided to divest their AI stock shares.
To me, at least, it feels like analysts were asking for too much. There’s nothing terrible about 20% year-over-year growth in one business segment. Moreover, let’s not ignore C3.ai’s overall top-line and bottom-line Street beats. All in all, C3.ai had a respectable quarter, and there’s really no reason to panic.
Is C3.ai Stock a Buy, According to Analysts?
On TipRanks, AI stock is rated as a Moderate Buy based on four Buys, five Holds, and two Sells assigned by analysts in the past three months. In addition, the average C3.ai stock price target is $28.11, implying 35.44% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell AI stock, the most profitable analyst covering the stock (on a one-year timeframe) is Patrick Walravens of JMP Securities, with an average return of 17.65% per rating and a 54% success rate.
Conclusion: Should You Consider C3.ai Stock?
C3.ai surpassed analysts’ consensus revenue and income-per-share estimates. However, short-term traders chose to sell their C3.ai shares because the company isn’t profitable right now and/or because C3.ai’s Subscription revenue didn’t match up to Wall Street’s expectations.
If those are insufficient excuses to sell C3.ai and the share price is now low, then AI-technology enthusiasts ought to put C3.ai on their watch lists. When all is said and done, I am bullish about AI stock, and if I wanted to add AI-tech exposure to my portfolio, then I would consider purchasing a few C3.ai shares today.
