Artificial intelligence (AI) is a rapidly advancing technology, and thanks to companies like C3.ai (AI 0.49%), it's gradually becoming accessible to all businesses in all industries. The company is blazing a trail in a brand-new sector it calls enterprise AI, where it sells ready-made and customizable AI applications to customers wanting to supercharge their operations.
Estimates suggest that by 2030, up to 70% of all organizations will be implementing AI in one way or another, adding $13 trillion in output to the global economy. It's a sizable opportunity for a company like C3.ai, and it already has a leadership position in the industry.
The largest technology companies in the world have established partnerships with C3.ai, including Amazon, Microsoft, and Google parent Alphabet, validating the quality of what the company is building. It's one reason investors should consider owning C3.ai stock, especially since it's attractively priced right now after declining 90% from its all-time high.
C3.ai is expanding access to artificial intelligence
C3.ai just reported its financial results for the first quarter of fiscal 2023 (ended July 31), and during the period it grew its customer base by 27% year over year to 228 companies. Those companies operate within at least 11 different industries, from tech to finance manufacturing, which highlights the diversity of C3.ai's AI applications.
As a prime example, C3.ai's technology is incredibly popular with oil and gas giants, which are seeking advanced AI to help them run cleaner operations. C3.ai helps them reduce carbon emissions and predict critical equipment failures to prevent catastrophic environmental disasters. Global oil behemoth Shell monitors over 13,000 pieces of equipment through C3.ai, with 1.2 million daily data streams.
Technology leaders Amazon, Microsoft, and Alphabet are all collaborating with C3.ai to build upon their expansive cloud services segments. Given the rapid shift to online operations for many businesses, the cloud has become a critical facilitator, and there's a race among providers to deliver the most impactful solutions. With Google Cloud specifically, one of C3.ai's roles is to help small businesses more quickly adopt AI and draw maximum value from their AI applications.
At this time last year, C3.ai and Microsoft had closed over $200 million in deals together for the Azure cloud platform. Their partnership continues to grow, and they signed 16 new joint sales in the first quarter.
C3.ai stock is cheap right now
After reporting its financial results for the first quarter, investors sent C3.ai stock down 15% in after-hours trading. They appeared disappointed by the company's forward guidance for the full fiscal 2023 year, which suggested revenue might only grow by 7% compared to fiscal 2022. C3.ai says the challenging economic environment at the moment is causing customers to be more stringent when committing to large contracts.
Still, the company managed to grow its quarterly revenue by 25% year over year to $65 million. Additionally, it's transitioning from subscription-based pricing to a consumption-based pricing model and tweaking its sales and partnership models in moves designed to accelerate growth. It says this will boost adoption and increase C3.ai's market share over time.
The company isn't profitable yet because it's still investing heavily in expansion, which is the right thing to do considering its revenue and customer base are still growing quickly in the short term -- although this kind of strategy is generally unpopular with investors right now, as risk appetite is low. It lost $71.8 million in the first quarter, which followed a $192 million net loss for the fiscal 2022 year. But C3.ai has over $900 million in cash, equivalents, and short-term investments on its balance sheet, so it can afford to spend aggressively for the time being.
C3.ai's market capitalization stands at just $1.65 billion at the moment, which means investors are only valuing the business at $750 million net of cash. That's a paltry 3 times fiscal 2022 sales. Given the company estimates its opportunity could be worth $596 billion by 2025, plus considering the blockbuster partnerships and customer relationships C3.ai has already accumulated, this might be a golden opportunity for investors to take a long-term position.
