TLDR
- C3.ai (AI) plunged approximately 22% during extended trading hours following disappointing Q3 financial results
- Quarterly revenue totaled $53.3M compared to analyst expectations of $77.6M; loss per share reached -$0.40 versus -$0.29 forecast
- Fourth-quarter revenue projections were dramatically reduced to $48M–$52M, significantly below the $77.72M analyst consensus
- Management revealed a major restructuring initiative eliminating $135M in expenses, including a 26% reduction in workforce
- Following the disappointing report, Citizens downgraded shares to Market Perform from Market Outperform
C3.ai delivered fiscal third-quarter financial results that significantly underperformed analyst projections, triggering a sharp approximately 22% decline in the stock during after-hours trading Wednesday.
Quarterly revenue totaled $53.3 million, substantially below the Wall Street consensus forecast of $75.6 million. The enterprise AI software company also posted a non-GAAP loss of $0.40 per share, exceeding the anticipated $0.29 loss.
The revenue performance reflected a 46% year-over-year contraction — significantly steeper than the 20% decrease registered during the previous quarter.
Subscription-based revenue, representing the company’s primary income source, totaled $48.2 million. This marked a 44% annual decline and fell considerably short of the $68.5 million analyst projection.
The company generated negative free cash flow of $56.2 million, materially worse than the negative $30.8 million consensus forecast.
Chief Executive Officer Stephen Ehikian spoke candidly about the disappointing performance. “Fiscal third quarter results were clearly inadequate and well below our objectives,” he acknowledged during the earnings conference call. “We failed to close business as planned.”
He identified sales execution as the primary culprit, particularly across North American and European markets. “I was going to say simply sales execution, full stop,” Ehikian explained to analysts. “That falls on me full stop. I own that, and I’m going to fix that.”
Restructuring and Cost Cuts
In response to the performance challenges, C3.ai unveiled a comprehensive restructuring initiative designed to eliminate $135 million in operating expenses. The plan includes $60 million in savings linked to eliminating 26% of the company’s workforce.
Management indicated that the majority of workforce adjustments have already been implemented. Chief Financial Officer Hitesh Lath projected that the full cost savings impact would materialize beginning in the latter half of fiscal 2027.
The broader restructuring effort encompasses streamlining the sales organization structure and accelerating product development through expanded deployment of Agentic AI capabilities throughout business operations.
Guidance Comes in Far Below Estimates
For the upcoming fourth quarter, C3.ai projected revenue ranging from $48 million to $52 million. This represents a stark contrast to the Street’s expectation of $77.72 million — marking one of the company’s most significant guidance shortfalls in recent history.
Full fiscal year revenue is now anticipated to finish between $246.7 million and $250.7 million, substantially below the previous consensus estimate of $298.74 million.
One bright spot emerged from the results: federal government business remained robust. Federal bookings surged 134% year-over-year and represented 55% of total quarterly bookings. Recent customer acquisitions included the U.S. Department of Agriculture, U.S. Department of Energy, NATO, the Royal Navy, GSK, Thales, ExxonMobil, and U.S. Steel.
Ehikian highlighted that subscriptions generated 90% of quarterly revenue, with zero contribution from nonrecurring subscription arrangements.
Citizens responded swiftly following the earnings release, downgrading C3.ai to Market Perform from Market Outperform. Prior to the earnings announcement, shares had already declined 23% year-to-date, while the Russell 3000 index advanced 2% during the comparable period.
Over the trailing twelve months, C3.ai shares have fallen 61%. The company currently maintains a market capitalization of approximately $1.45 billion. With a beta coefficient of 2.0, the stock exhibits elevated volatility in both directions — a characteristic on full display Wednesday evening.
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