Shares of C3.ai (AI 3.02%) turned sharply lower this week, plunging as much as 18.7%, according to data provided by S&P Global Market Intelligence. As of 1:14 p.m. ET on Thursday, the stock was still down 15.6%.
There's little question that the stock has benefited from the buzz surrounding artificial intelligence (AI) this year, but the company issued a tepid financial report after the market close on Wednesday, which took the wind out of its sails.
Boom or bust?
For its fiscal 2024 second quarter (ended Oct. 31), C3.ai generated revenue of $73.2 million, which was up 17% year over year, despite the accelerating adoption of AI. Equally as troubling was the company's gross profit margin, which plunged to 56%, down from 67% in the prior-year quarter.
C3.ai's operating losses expanded as cost increases outpaced revenue gains. This resulted in a net loss of $69.6 million, which worsened from a loss of $68.9 million. This resulted in an adjusted (non-GAAP) loss per share of $0.13.
For context, analysts' consensus estimates were calling for revenue of $74.3 million and an adjusted loss per share of $0.18.
Now what
Investors were also concerned about the company's tepid outlook. C3.ai forecast third-quarter revenue of $76 million at the midpoint of its guidance, which would represent year-over-year growth of 14%, a deceleration compared to the current quarter. Even if the company hits the high end of its range, this will result in growth of 17%.
While other companies in the space have been able to leverage the accelerating adoption of AI to their advantage, C3.ai seems stuck in neutral, and despite management's positive spin, investors are clearly disappointed.
C3.ai changed its pricing strategy last year, switching from a subscription-based to a consumption-based pricing model, which it touted in its earnings release. But the results have yet to bear out the success of this move.
Given the company's failure to capitalize on the current AI boom, I continue to maintain that there are better AI stocks to choose from.
