Key Highlights
- Shares of C3.ai (AI) plummeted approximately 22% during extended trading hours following a significant earnings disappointment
- Third-quarter revenue totaled $53.3M against analyst expectations of $77.6M; loss per share reached -$0.40 versus -$0.29 forecast
- Management slashed Q4 revenue projections to a range of $48M–$52M, dramatically below the $77.72M Street consensus
- The enterprise AI company unveiled a major restructuring initiative targeting $135M in cost reductions, including 26% staff layoffs
- Investment firm Citizens immediately downgraded shares to Market Perform from Market Outperform
C3.ai delivered fiscal third-quarter financial results that significantly underperformed analyst projections, triggering a sharp 22% decline in share price during after-hours trading Wednesday.
The enterprise AI software provider reported quarterly revenue of $53.3 million, falling substantially short of the $75.6 million Wall Street consensus. Additionally, the company posted a non-GAAP loss of $0.40 per share, exceeding the anticipated $0.29 loss.
The revenue performance marked a dramatic 46% year-over-year decline—significantly steeper than the 20% decrease registered in the previous quarter.
Subscription-based revenue, representing the company’s primary income stream, totaled $48.2 million. This figure reflected a 44% year-over-year contraction and missed analyst projections of $68.5 million substantially.
The company generated negative free cash flow of $56.2 million, compared to consensus expectations of negative $30.8 million.
Chief Executive Officer Stephen Ehikian addressed the disappointing performance directly during the earnings conference call. “Fiscal third quarter results were clearly inadequate and well below our objectives,” he acknowledged. “We failed to close business as planned.”
Ehikian placed responsibility squarely on sales execution challenges, particularly across North American and European markets. “I was going to say simply sales execution, full stop,” he explained to analysts. “That falls on me full stop. I own that, and I’m going to fix that.”
Major Restructuring Initiative and Expense Reductions
In response to the performance shortfall, C3.ai unveiled a comprehensive restructuring strategy designed to eliminate $135 million in annual expenses. The plan encompasses $60 million in savings directly tied to eliminating 26% of the company’s workforce.
Management indicated that the majority of personnel reductions have already been implemented. Chief Financial Officer Hitesh Lath explained that the full impact of cost savings should materialize beginning in the second half of fiscal 2027.
The broader transformation effort includes streamlining the sales organization structure and accelerating product development by incorporating Agentic AI capabilities throughout various business segments.
Fourth-Quarter Outlook Falls Dramatically Short of Projections
For the upcoming fourth quarter, C3.ai projected revenue between $48 million and $52 million. This guidance came in dramatically below Wall Street’s $77.72 million expectation—representing one of the most significant guidance misses in the company’s recent history.
Full fiscal year revenue is now anticipated to range from $246.7 million to $250.7 million, compared to the previous Street consensus of $298.74 million.
One segment that demonstrated strength: government contracts. Federal bookings surged 134% year-over-year and comprised 55% of total bookings during the quarter. Notable new 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 no nonrecurring subscription revenue included in the figures.
Citizens responded immediately to the earnings release, downgrading C3.ai shares to Market Perform from Market Outperform. Prior to the earnings announcement, the stock had already declined 23% year-to-date, while the Russell 3000 index gained 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 equity exhibits heightened volatility in both directions—as Wednesday evening’s price action clearly demonstrated.
