The artificial intelligence (AI) boom has already created trillions of dollars in value for some of the world's largest tech giants, but it hasn't been a golden ticket for every company. C3.ai (AI 4.08%) offers over 130 ready-made AI applications that help businesses accelerate their adoption of this revolutionary technology, and its stock has plummeted by 55% this year.
The decline was partly triggered by the unexpected retirement of the company's founder and CEO, Thomas Siebel, who stepped away in September due to health issues. He played an active role in the sales department, where he was responsible for getting major deals over the line with some of C3.ai's largest customers. The company's revenue plunged the moment he relinquished his position.
C3.ai's new CEO, Stephen Ehikian, is an experienced operator who could help the company find its footing, so should investors use the steep drop in its stock as a buying opportunity? Here's what Wall Street thinks.
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C3.ai has a unique business model
The data center infrastructure and chips required to develop a high-quality AI model from scratch can cost billions of dollars, which the majority of businesses simply don't have. As a result, many of them are turning to C3.ai's ready-made applications, which make AI adoption far more cost effective.
One of them is the C3.ai Reliability application, which reduces downtime for manufacturers by up to 50% by predicting equipment failures, allowing them to perform preventative maintenance. Then there is the C3.ai Smart Lending application, which helps banks reduce the time it takes to approve potential borrowers by up to 30%.
C3.ai's applications can be configured and deployed in under six months, creating an accelerated pathway to AI adoption for businesses in over a dozen industries. To make the process even easier, the applications can be integrated with leading cloud platforms like Amazon Web Services and Microsoft Azure, which many businesses already use. Those cloud providers offer data center computing capacity on tap, which can be used to rapidly scale C3.ai's applications as needed.
C3.ai's revenue plunged in the first half of fiscal 2026
C3.ai delivered $145.4 million in total revenue during the first half of its fiscal year 2026 (ended Oct. 31), which was down 20% from the year-ago period. Management came into this fiscal year expecting revenue growth, so the decline (which was triggered by the departure of Siebel) caught the team by surprise.
C3.ai's executive team couldn't cut costs fast enough to avoid a blowout loss at the bottom line, so the company ended the first half of fiscal 2026 in the red to the tune of $221.4 million on a generally accepted accounting principles (GAAP) basis. That was a 72% jump compared to its loss in the year-ago period.
C3.ai also lost $84.5 million on an adjusted (non-GAAP) basis, after stripping out one-off and noncash expenses like stock-based compensation. That was a whopping 474% increase from the year-ago period.
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Key Data Points
Company founders like Siebel who serve as CEO for a long time often become part of the corporate brand, so significant disruptions to the business are always a key risk when they depart. Unfortunately for investors, it's going to take time for C3.ai to bounce back, because management is forecasting a revenue decline of up to 26% for fiscal 2026 overall.
With that said, the company's new CEO brings a lot of experience to the table. He has served on the board of several public and private organizations, and he also founded two AI start-ups that were acquired by Salesforce, so he likely has the skills to turn C3.ai around over the long term.
Wall Street isn't banking on any upside for C3.ai stock in 2026
The Wall Street Journal tracks 16 analysts who cover C3.ai stock, and only two have given it a buy rating. Seven others recommend holding, while three are in the underweight (bearish) camp. The remaining four analysts recommend outright selling.
The analysts have an average price target of $14.67, which suggests C3.ai stock could decline by 8% from its current price over the next 12 months or so. That's not a good sign for investors, but shrinking businesses tend to destroy shareholder value over the long term, so it's no surprise Wall Street is taking a cautious stance. Analysts probably won't change their tune until C3.ai proves it can consistently grow its revenue again.
This is one of those situations where a stock isn't necessarily cheap just because it has suffered a steep decline, so the 55% dip in C3.ai might not be a buying opportunity heading into the new year.
