Shares of C3.ai (AI +4.39%) have underperformed the broader market in 2024, gaining 3% so far compared to the 6% gains delivered by the Nasdaq-100 Technology Sector index, but it looks like the company's fortunes could change following its latest quarterly report.
C3.ai provides artificial intelligence (AI) software for enterprise applications, and the stock popped substantially after the company released fourth-quarter fiscal 2024 results (for the three months ended April 30, 2024) on May 29. Let's see why investors cheered C3.ai's results and check if the stock can sustain its newly found momentum.
NYSE: AI
Key Data Points
C3.ai's growth is accelerating
C3.ai's revenue increased 20% year over year in the previous quarter to $86.6 million, which was well ahead of the $84.4 million consensus estimate. It is worth noting that the AI software specialist reported flat revenue growth in the same quarter last year. The company's non-GAAP net loss shrunk to $0.11 per share in the latest quarter from $0.13 per share last year. Analysts were projecting a bigger loss of $0.30 per share.
However, the company benefited from the "intensifying" demand for enterprise AI software, according to CEO Thomas Siebel. This was the fifth consecutive quarter during which C3.ai's growth has accelerated. What's more, the company's outlook suggests that a better year is in the cards.
C3.ai is expecting fiscal 2025 revenue to land between $370 million and $395 million, the midpoint of which would translate into a jump of 23% from the same period last year. For comparison, C3.ai's revenue increased 16% in fiscal 2024 to $310.6 million. However, don't be surprised to see the company finishing the year with stronger growth thanks to the solid demand for its AI software offerings.
The company struck 191 agreements with customers in the previous fiscal year, an increase of 52% over the prior year. Additionally, the company has 34 pilot projects in progress across customers of various sizes, which indicates that its revenue pipeline could continue improving. Even better, C3.ai's business model of partnering with major cloud service providers and offering its enterprise AI applications on their cloud performs is bearing fruit.
The company closed 115 client agreements in fiscal 2024 through its network of partners, which includes the likes of Alphabet's Google Cloud, Microsoft Azure, and Amazon Web Services. That represents a jump of 62% from the previous fiscal year. C3.ai management also pointed out that its pipeline of qualified leads within the partner network increased 63% year over year.
C3.ai's enterprise software applications are finding traction with federal agencies as well. The company's federal revenue more than doubled in fiscal 2024, and this niche presents a solid growth opportunity for the company in the long run as governments across the globe are set to pour huge amounts of money into this technology.
The overall market for AI software is expected to clock annual growth of a whopping 69% through 2032, according to Bloomberg Intelligence, generating $280 billion in annual revenue at the end of the forecast period. So, it is not surprising to see why analysts are expecting the company's growth to pick up.
AI Revenue Estimates for Current Fiscal Year data by YCharts
Should investors buy the stock right now?
C3.ai is currently trading at 11 times sales. Though that's higher than the U.S. technology sector's price-to-sales ratio of 7.3, C3.ai stock is cheaper than fellow AI software company Palantir Technologies, which trades at 22 times sales.
Palantir is expecting its 2024 revenue to increase by 21% to $2.68 billion. So, C3.ai looks like a better bet considering that it is expected to deliver faster growth and is much cheaper than its AI software counterpart. That's why investors looking to add an AI stock to their portfolios can consider buying C3.ai, as it could start soaring thanks to the AI-fueled acceleration in its growth.
