C3.ai (AI 1.00%) may be one of the more confusing stocks on the market today. It is one of the few companies that amounts to an "all-in" bet on artificial intelligence (AI). Consequently, in what looks increasingly like an AI-driven bull market, the stock has made massive gains since the beginning of the year.

However, its financials have pointed to a much less optimistic story amid slow revenue growth and mounting losses for the AI company. The question for investors is whether C3.ai's AI-driven business justifies the recent bull move in the stock or whether they should heed the financials and avoid these shares.

The bull case: C3.ai's growing and diverse business

C3.ai bills itself as "the world's leading provider of enterprise AI." To this end, it helps enterprises build AI-based applications more efficiently and at a lower cost. Its applications are pre-built and configurable, and users apply them to fraud detection, optimization of supply networks, customer engagement, and other applications.

The company says it can support any industry, and indeed, it has attracted a diverse set of clients. Still, it seems to attract its strongest following in a couple of key sectors. The oil and gas and the federal, defense, and aerospace industries made up around 63% of its revenue in fiscal 2023 (ended April 30).

Moreover, it has built a partner network that includes most of the largest cloud providers, including Amazon, Microsoft, Alphabet, and many others. In fiscal 2023, it closed 71 partner agreements.

Additionally, it released its generative AI solution in fiscal Q4 as investors became increasingly interested in the field. To this end, it also closed agreements with the likes of Georgia-Pacific and the Department of Defense Missile Defense Agency. Between the numerous partner agreements and its growing portfolio of AI solutions, it has become a critical part of the AI ecosystem of numerous companies.

Consequently, these products and the market's recent interest in AI have dramatically boosted the stock. Since the beginning of the year, C3.ai stock is up by around 225%.

The bear case: Company financials

However, while the stock price has experienced a massive surge, all of the client wins do not seem to translate into rapidly improving financials. In fiscal 2023, revenue grew by only 6% to $267 million. And in fiscal Q4, revenue growth was under 1%, showing the recent hype surrounding AI has not brought the company revenue gains.

Also, gross profit dropped by 5% as the 22% increase in operating expenses took its toll on the bottom line. For the fiscal year, its losses came in at $269 million, more than its loss of $192 million in fiscal 2022.

Additionally, though its valuation is well below levels from the bull market of 2020 and 2021, it has risen significantly in recent months. Its price-to-sales (P/S) ratio has now climbed to 15, up from 4 at the beginning of the year. This confirms that the financials did not improve significantly even as the stock climbed.

Avoid C3.ai stock

The AI industry has thrived this year, dramatically boosting C3.ai's stock. Still, it does not seem to have helped C3.ai as a company. Unfortunately, its products and diverse client base have not translated into significant revenue gains.

Moreover, losses continue to worsen, and with the recent stock price increases, its valuation has soared. That likely means that unless the company's financials improve significantly, it could limit further upside in the stock.