C3.ai (AI -4.86%) has experienced its fair share of volatility but can it ignite its revenue growth and better diversify its customers? In this clip from "IPO & SPAC Show" on Motley Fool Live, recorded on April 11, Motley Fool contributors Jason Hall and Danny Vena discuss some of the areas of concern around C3.ai, and what they want to see the AI stock improve going forward.
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Jason Hall: There's a lot of positive result that's happening in the energy industry. Baker Hughes (BKR -2.82%) is its most important customer and it's not even close. One way to read this headline, Baker Hughes collaborates with C3, Accenture (ACN 1.14%) and Microsoft (MSFT 0.34%) on industrial asset management solutions and say, "Hey, that's a real positive because now it's starting to work with some of the big consulting firms that are going to play a huge role in enterprise AI." It's working with Microsoft, the most important software company on Earth. That's positive. The other way to look at this is,where does C3 fit in with these? Is it getting pulled into this because of its deep relationship with Baker Hughes? Or, is it truly a value-added part of that? I think at this point, it's too early to tell. I want to pull up the stock chart one more time and I want to say that this could be a better risk adjusted opportunity to buy the company than here. But with that said, it's burning an increasing amount of cash above its revenue growth. It's not exactly any less concentrated to a couple of large customers now than it was back here. I really want to see C3 begin to really start diversifying its revenue streams in a more broad way. That really hasn't happened yet. It's becoming more of a government contractor and has ties to the energy industry. I'm not sure if those are going to be clear positives. I want to see more growth across corporate and that enterprise AI story they talk about that they advertise, I want to see it actually start being more reflected in their results. I'm not giving up. I own a pretty modest position. I'm not adding right now. I want to see more diversification of their customers, more enterprise business, more recurring revenue from their enterprise businesses, and the revenue growth start to exceed operation expense growth.
Danny Vena: Yes. I want to make one quick comment before we move on and that is, that contract with Baker Hughes was essentially all of the RPO growth that they showed. Without that, their remaining performance obligation would've actually sank for the quarter. That's definitely a concern for investors and part of the reason why the stock has taken as big of a hit as it has.
Hall: Makes that customer growth metric even more suspect.
