2025 has turned out to be a disappointing year for C3.ai (AI -0.14%) investors so far. Shares of the enterprise artificial intelligence (AI) software provider trade down about 29% so far as of this writing, due to broader weakness in technology stocks early in the year.
However, a closer look at the recent stock price action suggests C3.ai stock may be making a comeback. It has jumped 24% since hitting a 52-week low on April 7. But will C3.ai be able to sustain its newly found momentum in the long run and deliver more gains to investors over the next three years?
Let's find out.
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C3.ai's huge addressable market should ideally lead to stronger growth
C3.ai's revenue growth has accelerated in recent years. Its revenue in fiscal 2025 (which ended on April 30) increased 25% year over year to $389 million, an improvement over the 16% growth rate it clocked in fiscal 2024. For some more perspective, C3.ai's revenue in fiscal 2023 increased at a much slower pace of 5%.
This improved growth trajectory seems sustainable considering that the market for enterprise AI applications could exceed $600 billion in revenue by 2028, according to market research firm IDC, up from $356 billion in 2023. The firm points out that the integration of AI and generative AI tools into enterprise applications will play a key role in driving this incremental revenue opportunity.
The growing adoption of AI solutions in enterprise applications will expand C3.ai's addressable opportunity and allow it to land more business from both commercial and government customers. Importantly, C3.ai uses a smart strategy of partnering with major cloud computing providers and consulting giants to expand its reach.
It strengthened its relationship with Microsoft late last year to offer its full suite of enterprise AI software on the cloud giant's Azure platform, a move that allows it to score more pilot projects and enhance its distribution network. Additionally, C3.ai recently partnered with McKinsey & Company and PwC to offer its enterprise AI applications to their customers.
Such moves should ideally allow C3.ai to bring more customers into its fold and sustain the impressive growth momentum it's seen in recent years. The company closed 193 agreements through its partner network in fiscal 2025, an increase of 68% from the preceding year -- higher than the 38% increase in the total number of agreements that it closed in fiscal 2025.
So the partner network is driving stronger growth for C3.ai, a trend that's likely to continue since it has added a couple of new partners in the form of PwC and McKinsey. Also, the company started gaining good traction in the federal space. The U.S. Air Force increased its contract ceiling with C3.ai to $450 million from the initial contract of $100 million. The contract runs for the next four years, with C3.ai set to provide predictive maintenance of aircraft, ground assets, and weapons systems.
The size of the contract suggests that it can significantly boost C3.ai's top line over the next three to four years. Additionally, the adoption of C3.ai's generative AI solutions by other government agencies, especially its agentic AI offerings, also improved. According to CEO Thomas Siebel:
We have today, I think, over 100 Agentic AI solutions deployed out there in defense, in intelligence, in state government, in local government, in manufacturing, in oil and gas, in paper and pulp. And this is a large and rapidly growing business. So as of the fourth quarter, this ... annualizes to about a $60 million ARR business.
With the agentic AI market projected to grow at an annual rate of 44% through 2034, it could open up another major growth opportunity for C3.ai to capitalize on.
How much upside can investors expect over the next three years?
C3.ai's revenue guidance for the current year points toward a potential jump of 20% in its top line to $465 million. Consensus estimates project a similar jump next year, followed by a much stronger jump in fiscal 2028.
Data by YCharts.
Of course, there is a good chance that C3.ai could do better and outpace Wall Street's growth expectations in the future. But even if its top line jumps to $696 million in fiscal 2028 and the stock trades at 8 times sales at that time (in line with the U.S. technology sector's average sales multiple), its market cap could hit $5.6 billion.
That points toward a potential upside of 78% from current levels. C3.ai currently trades at less than 8 times sales, so it has the potential to fly higher even if it trades at a discount after three years. As such, investors looking to add an AI stock to their portfolios would do well to buy C3.ai right now as it can sustain its recent rally and deliver healthy gains over the next three years.
