What happened

Shares of C3.ai (AI -1.88%) were jumping after the software-as-a-service (SaaS) platform for artificial intelligence posted better-than-expected preliminary results for its fiscal fourth quarter. It also concluded an investigation into short-seller allegations by Spruce Point and Kerrisdale Capital. 

As of 11:39 a.m. ET, the stock was up 17.5%.

So what

C3.ai said it exceeded its fourth-quarter guidance, with expected revenue of $72.1 million to $72.4 million, which is better than its forecast of $70 million to $72 million in revenue. That result was also better than the analyst consensus at $71.1 million, but just flat with revenue in the quarter a year ago at $72.3 million. 

C3.ai also reported a generally accepted accounting principles (GAAP) loss of $75.9 million to $77.1 million and adjusted operating loss of $23.7 million to $23.9 million, which was ahead of its guidance at $24 million to $28 million.

It also said it expected to report positive free cash flow of $18 million to $19.4 million, and that gap is likely the result of substantial stock-based compensation and possibly collections in accounts receivable, which could put to rest one concern of the short-sellers. Nonetheless, the company is still on track to have a free cash flow loss of roughly $185 million for the year, or around two-thirds of its revenue.

CEO Thomas Siebel took another opportunity to talk up the stock, saying, "As we began the fiscal year on May 1, the company has never been better positioned. I believe we now have broad consensus that the addressable market for enterprise AI is extraordinarily large."

Investors also responded positively to the news that the company had concluded its investigation into the short-seller report without finding fault.

Now what

While investors are clearly excited by the latest update from C3.ai, revenue still isn't growing, and the company is deeply unprofitable, as its GAAP operating loss exceeded revenue in the fourth quarter.

The market may be falling for AI stocks, but C3.ai still has a lot to prove before it should be considered a smart investment.