C3.ai (AI -6.77%) has pioneered a brand-new industry known as enterprise artificial intelligence (AI). It breaks down the technical and financial barriers to accessing AI for many industries that wouldn't normally be associated with the advanced technology.

It has also attracted several partnerships with trillion-dollar tech giants, and its customer base continues to grow rapidly. The company is currently transforming the economics of its business, which could result in supercharged sales growth over the next few years. 

Given its stock is down 91% from its all-time high, that spells opportunity for investors. Here's why C3.ai is a dip worth buying.

C3.ai is accelerating the adoption of artificial intelligence

Artificial intelligence is becoming a key proponent for a growing number of businesses, thanks to its ability to complete complex tasks and analyze high volumes of data in a fraction of the time that humans can. In fact, according to the McKinsey Global Institute, up to 70% of companies will have adopted AI in some capacity by 2030, adding $13 trillion to the global economy. 

C3.ai is one of the first-ever enterprise AI solutions, providing both ready-made and customizable models to help businesses accelerate their adoption of the technology. It accepted bookings from companies in nine different industries in the recent second quarter of fiscal 2023 (ended Oct. 31). The oil and gas sector is regularly C3.ai's largest driver of revenue, as it increasingly uses AI to deliver cleaner production, and to predict failures in critical items of equipment in order to prevent environmental catastrophes.

But C3.ai has also attracted recognition from the world's largest technology companies. Amazon, Microsoft, and Google parent Alphabet are all collaborating with C3.ai to accelerate AI initiatives across their respective cloud platforms. They're also jointly selling cloud services with C3.ai to increase customer adoption -- on Amazon Web Services, a customer can build an AI application having written 99% less code than would otherwise be required without C3.ai's integration.

C3.ai had 236 customers at the end of the second quarter, which was nearly a 17% jump year over year, but it's about to get much easier for businesses to come aboard thanks to one key shift the company is making.

C3.ai is transforming its revenue model

Until now, C3.ai typically charged its customers on a subscription basis for the use of its platforms. But it recently embarked on an important transition to a consumption-based model, which will negatively impact its revenue in the short term but should result in a substantial growth acceleration in the longer run.

Why? Because subscriptions are usually paid upfront, and C3.ai knows roughly how much money it's going to earn from each customer contract in advance. Consumption-based revenue is paid in arrears instead, so it will take time for the results to flow through as the company shifts more of its customers to this new arrangement. 

This will also significantly reduce C3.ai's sales cycle, because it won't have to spend months negotiating contracts and pricing. Instead, customers can immediately come aboard and begin using C3.ai's tools, incurring costs only for what they actually use. While their expenditure will be smaller in the beginning, it will ramp up significantly as usage increases. Over time, this could result in much higher demand for the company's AI solutions, which is where some of the revenue-growth acceleration might come from. 

A chart comparing C3.ai's subscription and consumption revenue models.

Data source: C3.ai.

The chart shows that C3.ai is currently in phase one of this process, and it's the main culprit for the company's slow revenue growth of just 7% in the recent second quarter of fiscal 2023.

C3.ai has a major opportunity ahead, as do its investors

C3.ai places the value of its addressable opportunity at $596 billion, and it has a discernible first-mover advantage, with the backing of over 100 granted patents and pending applications globally.

The company isn't profitable just yet, as it's still laser-focused on investing in growth. But in this difficult economic environment, investors are actively selling companies that aren't making money. C3.ai has generated a net loss of $140 million in the first six months of fiscal 2023, but it does have over $840 million in cash, equivalents, and short-term investments on its balance sheet, which affords the company a buffer to continue executing its strategy.

That brings us to C3.ai's valuation. The stock is down 91% from its all-time high, and the company is currently worth a shade over $1.4 billion. But after stripping out cash, it implies investors are only valuing the business at around $600 million.

Yes, C3.ai's revenue growth is currently slowing and will likely be flat for the full fiscal 2023 year. But next fiscal year, as C3.ai's consumption-based sales model kicks into a higher gear, management expects revenue to grow by a whopping 30% (at minimum).

For investors with a long-term focus, buying C3.ai while it's so heavily discounted makes a lot of sense.