Stock of C3.ai experiencing significant drop today
In a blow to artificial intelligence (AI) company C3.ai, analyst Gil Luria of D.A. Davidson has downgraded the stock's rating from neutral to underperform, citing "catastrophic" results following the preliminary Q1 FY2026 earnings report.
The disappointing results, which showed a significant revenue miss and a widened operating loss, have led to a steep decline in C3.ai's share price and increased uncertainty due to the CEO transition. The company's preliminary Q1 revenue of $70.2–$70.4 million is 33% below Wall Street expectations, marking a substantial drop from prior forecasts.
C3.ai also reported a GAAP loss from operations of about $124.7 million and a widened non-GAAP operating loss of approximately $57.7 million, primarily due to increased expenses from a sales reorganization. Following this disappointing report, C3.ai shares dropped sharply by approximately 24–27%.
CEO Tom Siebel described the sales results as “completely unacceptable,” and acknowledged his recent health-related absence, as well as a disruptive sales overhaul that negatively impacted performance. The company has initiated a search for a successor CEO while Siebel remains engaged despite vision impairment.
Analysts have also downgraded the stock, citing concerns about the sharp 35% sequential revenue decline and questioning the effectiveness of C3.ai’s AI services and subscription revenue model. Despite fiscal 2025 ending with strong momentum—26% revenue growth, strategic partnerships with major cloud providers, and diversification beyond oil and gas—these gains have not yet translated into sustainable growth in FY2026.
Guidance for fiscal 2026 projects that loss per share will widen, with Q1 expected to show a 26% year-over-year increase in loss per share to $0.63, and fiscal 2026 losses forecast to widen 7% before narrowing in 2027.
Despite these challenges, the analyst believes that C3.ai's current share price drop could present a buying opportunity. If the company names the right person as CEO, there's potential for the company to turn its situation around. C3.ai has completed a significant restructuring of its sales and services divisions to "accelerate growth and increase customer success."
The market is awaiting the upcoming earnings call on September 3, 2025, for more clarity on the company’s recovery plans and revised strategy. In the meantime, C3.ai trades at a discount compared to some of its closest competitors, making it an intriguing prospect for investors seeking value in the AI sector. However, the operational challenges, leadership uncertainty, and investor skepticism suggest a cautious sentiment about C3.ai’s near-term growth prospects.
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