Shares of C3.ai (AI 3.02%) rallied out of the gate Tuesday, climbing as much as 7.2%. As of 12:18 p.m. ET, the stock was still up 3.4%.
While recent advances in the field of artificial intelligence (AI) have caused many related stocks to rally lately, the catalyst that sent the AI software provider climbing was better-than-expected results from a competitor in the space.
Strong demand for AI
Rival AI specialist Palantir Technologies (PLTR 3.73%) released its fourth-quarter report after market close yesterday, and the results were celebrated by investors. Palantir generated revenue that grew 20% year over year to $608 million, driven by strong demand for its AI offerings.
Particularly notable was the company's U.S. commercial revenue, which soared 70% as the company reduced its dependency on government contracts. It also marked the fifth consecutive quarter of profitability for the AI specialist.
CEO Alex Karp cited "surging demand" for AI as driving the results.
One of these things is not like the other
After the robust interest in AI solutions that characterized 2023, investors have been wondering whether that demand would continue. Palantir's results show that businesses continue to adopt AI solutions, but not all are created equal.
C3.ai has yet to prove that it will ultimately benefit in this fast-shifting technological landscape. While its results have improved, there's still much work to do. In the company's fiscal 2024 second quarter (ended Oct. 31), revenue of $73.2 million grew 17%.
This was C3.ai's best showing in some time, as management noted in its report. CEO Thomas Siebel said, "In the trailing four quarters, we have seen top-line year-over-year revenue growth increase from -4% in Q3 FY23, to 0% in Q4 FY23, to 11% in Q1 FY24, to 17% in Q2 FY24." For context, however, Palatir's revenue increased 17%, on average, over the preceding four quarters.
Astute investors will also note that C3.ai's losses continue to mount, as its loss per share of $0.59 was barely improved from its loss of $0.63 in the prior-year quarter -- and the company continues to burn cash. But given the unprecedented adoption of AI, C3.ai should be doing much better than it is. Until it does, investors should approach C3.ai stock with caution.
