What happened

Shares of C3.ai (AI 3.84%) slumped out of the gate Thursday, plunging as much as 21.8%. As of 1:05 p.m. ET, the stock was still floundering, down 21.3%.

The catalysts that sent the provider of enterprise artificial intelligence software lower were tepid financial results, a reduced forecast, and a marked change to how it charges customers for its services.

So what

For its fiscal 2023 first quarter (ended July 31), C3.ai generated revenue of $65.3 million, up 25% year over year, driven by subscription revenue of $57.4 million, up 24%. This resulted in an adjusted loss per share of $0.12, an improvement over a loss per share of $0.22 in the prior-year quarter.  

Analysts' consensus estimates were calling for revenue of $66 million and a loss per share of $0.24, so it was something of a mixed bag in terms of investor expectations.

C3.ai's remaining performance obligation (RPO), which consists of contractually obligated revenue that has yet to be recognized, surged to $458.2 million, up 58% year over year. This suggests that future revenue growth could outpace its current performance.

The company also increased its customer count to 228, up 27% year over year, signing 31 customer contracts during the quarter.

The unexpected announcement that sent the stock reeling, however, was a shift in the company's business model. Management revealed that C3.ai will now move away from a subscription payment model, instead charging customers using a consumption-based model, mimicking other cloud computing companies. Wall Street abhors uncertainty, and C3.ai just served up a big dose.

Now what

The changing business model wasn't the only thing that made the stock crater. Citing macroeconomic headwinds, management slashed the company's guidance. C3.ai now expects full-year revenue in a range of $255 million to $275 million, down from its previous range of $308 million to $316 million -- so this is a significant change. Furthermore, the company is guiding for a full-year non-GAAP (adjusted) operating loss of $90 million to $98 million, far worse than the loss of $76 million to $86 million it originally predicted.

Given the changes to its pricing structure and the huge downward revision to its outlook, investors might want to steer clear of C3.ai, at least until there's a bit more clarity on what the future holds.