It's a new month, and professionals on Wall Street were generally happy that the U.S. House of Representatives voted to pass a bill that would raise the debt ceiling and potentially avoid a default by the federal government. Stock index futures were up modestly on Thursday morning after the vote late last night, and investors also kept a watch on interest rates to see what a potential massive issuance of new Treasury debt might do to the financial system.
Yet even with market participants generally in a good mood, several AI stocks failed to give shareholders the outstanding performance that they had expected. Both C3.ai (AI 0.49%) and Salesforce (CRM -0.39%) have announced plans to lead the artificial intelligence revolution forward, yet neither company was able to reassure its investors that it will be able to sustain the growth rates that many have hoped to see.
C3.ai stock gives back some of its gains
Shares of C3.ai dropped 19% early Thursday morning. The enterprise AI application software company reported fiscal fourth-quarter financial results for the period ended April 30 that fell short of what its fans had hoped to see.
C3.ai's latest numbers showed the company's growth rate slowing to a near-standstill. Revenue was up 0.1% year over year to $72.4 million. Moreover, the AI specialist's margins fell sharply, leading to a wider net loss of nearly $65 million for the quarter. Even after making allowances for various extraordinary accounting items, C3.ai posted an adjusted net loss of $0.13 per share.
Nevertheless, the company remained optimistic about what the future could bring. In particular, C3.ai's adoption of consumption-based pricing could allow it to tap into the AI trend more effectively, especially because of its strategic moves to establish new customer relationships and expand its footprint with existing major clients. CEO Thomas Siebel pointed to more than 40 enterprise AI applications and the overarching C3 AI Platform as growth drivers for the future.
Yet guidance for between $295 million and $325 million in revenue in fiscal 2024 didn't inspire a strong response from investors, largely because it would represent growth of just 10% to 22% from fiscal 2023 levels. For the company to achieve the success shareholders want to see, C3.ai will have to do a better job of tapping into opportunities in artificial intelligence if it wants to hold on to all the gains its share price has enjoyed in the recent past.
Salesforce's growth keeps slowing
Shares of Salesforce were down 6% early Thursday following the release of its fiscal first-quarter financial report for the period ended April 30. The customer relationship management software pioneer has been looking for ways to expand into AI, but investors weren't pleased to see its overall revenue growth slow significantly.
Salesforce showed improvement in its financial numbers compared to year-ago levels, but not to the extent that many shareholders had wanted to see. Revenue was up 11% year over year to $8.25 billion. Operating expenses climbed more slowly, leading to a sizable 70% gain in adjusted net income to $1.67 billion. That produced adjusted earnings of $1.69 per share.
CEO Marc Benioff highlighted the efforts that Salesforce has made to incorporate the power of generative AI into its software portfolio. Moreover, the company has high aspirations to play a key role in assisting all of its clients to tap into the full power of AI.
Investors didn't seem satisfied, though, with Salesforce keeping its full-year revenue growth projections at around 10%. Despite improving margins, the hype surrounding artificial intelligence has led those investing with AI in mind to have what might be unrealistic ideas about just how much the trend will be able to boost financial performance in the years to come.
